Offshore Investors Sell Japan Equities For 6th Straight Week, Japan Investors Buy Bonds

Offshore investors continued to sell Japan stocks for the week ended August 23rd. This marked the 6th straight week of outflows from this segment (dating back to the first half of July). The peak in Japan equities was around the 11 of July, but offshore investors haven't returned to the market, in terms of net inflows, since the early August dip.

• This fits with other tech sensitive plays in EM Asia, like South Korea and Taiwan, where foreign selling of local equities has also been evident in recent weeks. This may reflect broader concerns around the tech outlook/valuations etc.
• Offshore purchases of local bonds continued though, albeit down from the prior week's pace, see the table below. This marked the third straight week of inflows into this space.
• In terms of Japan investor outflows, we saw continued solid momentum into offshore bonds, the fourth straight week of local purchases. Such flows may be picking up amid more signs of a turn in the global monetary policy cycle. JPY hedging costs have come down sharply recently, but are still elevated by historical standards.
• Local investors also picked up more offshore equities last week.

Table 1: Japan Weekly Foreign Investment Flows

Source: MNI - Market News/Bloomberg