JAPAN DATA: Offshore Investors Buy Both Local Bonds & Equities
In the week ending June 27 we saw offshore investors return to both Japan bond and equity markets, see the table below. The prior week (to end June 20) saw the first net selling of Japan stocks since the end of March, but with ¥651.3bn in net inflows last week we resumed positive trends in this space. Since the start of April, offshore net flows into local stocks have been over ¥7.3trln. Offshore investors also purchased local bonds last week in decent size. This markets the fourth out of the last five weeks we have seen positive inflows (cumulative inflows over this period are just over ¥2.5trln).
- In terms of Japan outbound flows, they were more modest in aggregate terms. We continued to see offshore bond purchases, marking the seventh out of the last eight weeks we have seen outflows to this segment (cumulative outflows over ¥6.6trln). This fits with generally positive global fixed income returns seen over this period.
- Local investors also purchased offshore equities for the first time since early May. This only marginally offset cumulative outflows seen over this period.
Table 1: Japan Weekly Offshore Investment Flows
| Billion Yen | Week ending June 27 | Prior Week |
| Foreign Buying Japan Stocks | 651.3 | -524.1 |
| Foreign Buying Japan Bonds | 1052.6 | -369.2 |
| Japan Buying Foreign Bonds | 182.8 | 615.1 |
| Japan Buying Foreign Stocks | 190.6 | -88.3 |
Source: Bloomberg Finance L.P./MNI
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US STOCKS: S&P Eyeing The 6000 Level Once Again
The ESM5 Overnight range was 5867.50 - 5955.50, Asia is currently trading around 5935. US stocks continue to find demand for now on dips, the S&P looks to be building for another test of 6000.
- (Reuters) - “The Trump administration wants countries to provide their best offer on trade negotiations by Wednesday as officials seek to accelerate talks with multiple partners ahead of a self-imposed deadline in just five weeks, according to a draft letter to negotiating partners viewed by Reuters”
- A succinct view by Boring Business on X: “The future increasingly feels like a battle between inflationary pressures from government money printing + debt monetization and deflationary pressures from AI + technology.” https://x.com/BoringBiz_/status/1929306350296645650
- (Bloomberg) - “Bank stocks are a proxy for the health of their domestic economy. If post-Liberation Day price action is a guide, traders are betting the US will come out the loser of the ongoing trade turmoil. While US banks are still trading at a higher average price-to-book ratio than those in the UK, Germany, France or Japan, they have cheapened the most of a global cohort since March.”
- Stocks could not get back above the 6000 area last week, the move looks overdone but momentum type funds and share buybacks have kept the market well supported. Share buybacks are set to enter their blackout period in the middle of June, will this be the catalyst to see some sort of a retracement in stocks ?
- The price action continues to point to a market that has been caught begrudgingly underweight, and as a result the dips continue to be supported.
In the short-term stocks are beginning to look overbought and a retracement would be healthy. The first buy-zone is back towards the 5600/5700 area where demand could be expected.
Fig 1: SPX Daily Chart
Source: MNI - Market News/Bloomberg
NEW ZEALAND: Terms Of Trade Rises Again, Strong Export Volume Growth
While the Q1 merchandise terms of trade rose less than expected at 1.9% q/q, it was the fifth straight monthly increase after it was up 3.2% in Q4. Statistics NZ notes that the softer kiwi “contributed” to higher export and import prices. Export volumes rose solidly for the second straight quarter boosted by dairy products and should be a positive in Q1 GDP when it is released on June 19.
NZ terms of trade y/y%
- Export prices rose 7.1% q/q to be up 17.2% y/y boosted by a 10.5% q/q increase in dairy prices and 7.2% q/q in meat, while import prices were up 5.1% q/q & 6.2% y/y. Consumer goods import prices rose 3.5% q/q to be up 5.5% y/y after 1.7% y/y in Q4. This is the highest annual rate since Q2 2023 and likely added to CPI inflation.
- The services terms of trade rose 4.2% q/q but was still down 7.3% y/y after -7.4% y/y in Q4. Services export prices rose 3.2% q/q & 3.8% y/y, while imports fell 0.8% q/q but were still up 12.1% y/y.
- Merchandise export volumes rose 4.7% q/q in Q1 driven by a 7% q/q jump in dairy products.
- Goods import volumes fell 2.5% q/q to be up 2.0% y/y down from Q4’s 5.8% y/y reflecting continued weak domestic demand. Consumer goods imports rose a moderate 0.2% q/q but annual growth eased to 2.5% from 5.9%.
NZ import prices vs CPI y/y%
JGBS: Futures Weaker Overnight, 10Y Supply & BoJ Ueda Speech Due Today
In post-Tokyo trade, JGB futures closed weaker, -18 compared to settlement levels, after US tsy yields rose. US yields were ~4bps higher across benchmarks. A heavy corporate issuance calendar likely weighed in, as did the late jump in risk appetite.
- The major US equity indexes were in the red through the morning amid renewed tariff angst due to the boost to steel and aluminium levies and concerns over an escalation of China trade tensions. Weaker ISM and construction spending data added to the early losses. But the markets crept higher into the afternoon, supported by big tech, until all the major indices posted moderate gains.
- Bloomberg - "Japan's economy is back on track after several lost decades." Well, almost. Inflation has returned. The Bank of Japan is normalising. Yields are climbing. Corporate profits have hit record highs. Exporters are holding up even against US tariffs. GDP growth? Stuck in low gear."
- "Japan will raise its foreign direct investment target to 120 trillion ($840 billion) by 2030. Total FDI stood at 53.3 trillion at the end of last year, yet it only accounted for less than 6% of the nation's GDP in 2023, ranking among the lowest globally."(BBG)
- Today, the local calendar will see Monetary Base data alongside 10-year supply and a speech by BoJ Ueda.
