Link: The great sell-off and why the Japanese market trades like a penny stock

Despite being the first day of full trading after the 2011 Tohoku quake, the world's largest nuclear plant in Fukushima in meltdown, and talks of evacuating Tokyo, Japanese stocks fell by only 6%. Yet in August 2024, a modest hike in the Bank of Japan's overnight rate and a soft US jobs report caused the Nikkei Average to plummet 12% in a day, turning the market into a penny stock.

Tuesday's session made the market appear unhinged from fundamentals and more like a casino, as it saw the Nikkei rebound with a 10% surge.

For Japan, this wasn't the image of a sober, resurgent investability they had been trying to project to global investors and skeptical domestic households.

The disarray still needs to be straightened out, and this process may not start amidst the looming threats of a US recession and Middle East war.

Investors may draw three conclusions from this situation: the cautious one, highlighting the ugly face of the economy; the optimistic one, suggesting the flushed out skittish money gives room for more stable capital; and the intriguing one, proposing the spasms and ructions are implied by Japan's "normalisation" after decades of abnormality.

Investors will likely scout for opportunities among the constituents where there is potential for capital efficiency, making stock picking the way to go in the Japanese market. #

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Yoooo, this is a quick note on a link that made me go, WTF? Find all past links here.