Japanese electronic trading giant Monex Group, Inc. (TYO:8698) has today released its seventeenth Global Retail Investor Survey, detailing expectations for Japan and other parts of Asia with recent strong stock price performance improved among retail investors in each region.
Currencies – US dollar still King
Monex asked U.S. and Chinese (Hong Kong) retail investors which currencies will rise the most in the coming three months.
Around 60% of U.S. and Chinese (Hong Kong) respondents (compared to 70% in the previous survey) chose the U.S. dollar. Although the largest percentage of retail investors in both regions forecast a stronger U.S. dollar, the percentage forecasting a stronger U.S. dollar decreased by 10 percentage points from the previous survey.
Japanese investors were asked about their forecast for the U.S. dollar-yen exchange rate in the coming three months. The percentage of retail investors forecasting a stronger U.S. dollar and a weaker yen jumped 28 points from the previous survey (in May 2015).
This shift probably reflects rising speculation that the FRB may start raising interest rates earlier than anticipated as well as the fact that the pair reached 125 yen during the survey period.
Technology was the most popular sector in the U.S. and China (Hong Kong), while the banking sector rose to fourth place in Japan.
Technology is of great interest in America and China
The most attractive sector for both U.S. and Chinese (Hong Kong) retail investors was “Technology.” Retail investors’ expectations were likely boosted by the emergence of various new products using the latest rapidly advancing technologies such as the Apple Watch.
For Japanese retail investors, the three most attractive sectors remained “Automobiles,” “Medical,” and “Technology,” but one feature of this survey was that the banking sector rose to fourth position, up from fifth in the previous survey. One reason for the improvement in Japanese retail investors’ expectations for the banking sector could be that the three megabanks renewed their year-to-date highs amid rising interest rates.
A comparison of major stock indices from the end of last year through May 2015 shows particularly remarkable gains in Japan and China, with the United States’ Dow Jones Industrial Average increasing 1.1%, Germany’s DAX Index rising 16.4%, Japan’s Nikkei 225 climbing 17.8%, and China’s Shanghai Composite Index up 42.6%. Under such conditions, investors in all the regions surveyed heightened their expectations for stock prices in Japan and China (Hong Kong) while lowering their expectations for U.S. stocks.
A major factor behind lackluster stock prices in the United States could be the widespread expectation of higher interest rates in the U.S. In Europe, Japan, and China, central banks are implementing monetary easing policies, and the need for additional easing may also be considered depending on economic developments.
The United States, on the other hand, is currently wrestling with the question of when to begin monetary tightening, and the U.S. dollar has been appreciating ahead of the tightening, due to the effects of other countries easing their monetary policies. Monetary policy in the United States over the coming months is likely to have a major impact on foreign exchange markets and stock markets in each region.
Summary of Findings
Monex Group asked retail investors in each region about their views on world stock markets for the coming three months. Japanese retail investors’ forecast diffusion index fell for the first time since the September 2014 survey, to 24 points, and the forecast diffusion index of retail investors in the United States also declined, as in the previous survey. However, the forecast diffusion index of retail investors in China (Hong Kong) improved from the previous survey, to 43 points.
This improvement is probably attributable to the strong performance of mainland Chinese stocks, with the Shanghai Composite Index climbing above 5,000 points for the first time since January 2008.
Monex Group also asked retail investors in each region about the most promising region in terms of stock price appreciation in the coming three months. Retail investors in all regions raised their expectations for Japan and Asia excluding Japan from the previous survey (conducted in March 2015).
This may be attributable to the noticeable rise of Japanese and Chinese stocks at a time when U.S. stocks were lackluster and the upward trend of European stock prices halted. Retail investors in all regions had the highest expectations for their own respective regions. For the first time since the December 2013 survey, Japanese retail investors’ expectations for Japanese stocks exceeded their expectations for U.S. stocks.
The company assumes that Japanese retail investors’ bullishness about the U.S. stock market was tempered by the fact that the U.S. stock market has been lackluster since the beginning of the year and the FRB is expected to increase interest rates, while the Nikkei Stock Average hit 20,000, causing Japanese retail investors to become bullish about Japanese stocks.
[Japan] U.S.: 28.8% Europe/U.K.: 8.5% Asia excl. Japan: 16.1% Japan: 46.6%
[U.S.] U.S.: 58.1% Europe/U.K.: 23.3% Asia excl. Japan: 9.3% Japan: 9.3%
[Hong Kong] U.S.: 19.2% Europe/U.K.: 8.2% Asia excl. Japan: 60.4% Japan: 12.2%
The views of retail investors in each region vary as to the timing of a rate hike by the Federal Reserve Board (“FRB”).
Monex Group asked retail investors about their views on the timing of an FRB rate hike. The percentage of retail investors who expect a rate hike in 2015 was around 60% in the U.S. and around 65% in China (Hong Kong), which was lower than in Japan where the percentage reached around 80%.
Although at the end of May FRB chair Janet Yellen expressed a desire to raise rates before the end of the year, these comments appear to have been interpreted differently from region to region.
Japan：（Jun 2015： 3.0%, Jul ~ Sep. 2015： 25.6%, Oct ~ Dec 2015: 53.4%, From 2016： 18.0%）
U.S.：（Jun 2015： 4.7%, Jul ~ Sep. 2015： 20.9%, Oct ~ Dec 2015: 34.9%、From 2016： 39.5%）
Hong Kong：（Jun 2015： 1.0%, Jul ~ Sep. 2015： 19.0%, Oct ~ Dec 2015: 45.0%、From 2016： 35.0%）
Japan Survey Results: Survey of Retail investors in Japan, Japanese stocks diffusion index rose sharply.
In addition, the survey asked Japanese retail investors about their outlook for stock markets in Japan, the U.S. and China in the coming three months. The diffusion index for Japanese stocks and U.S. stocks rose.
The Japanese stocks diffusion index jumped 19 points from the previous survey (May 2015), probably reflecting the solid performance of Japanese stocks. Meanwhile, the Chinese stocks diffusion index fell. Monex attributes this drop to a strong sense of caution, given that the Shanghai Composite Index had risen by more than 40% from the end of last year through May 2015.
Monex, Inc. has been surveying retail investors about their attitude to the financial market conditions on a monthly basis and providing you with the survey results as “Monex Retail Investor Survey” since October 2009. In addition to Japan, as Monex Group has established securities businesses in the U.S. and in China (Hong Kong), we expanded this retail investor survey geographically and added the U.S. and China (Hong Kong), in order to compile “Monex Global Retail Investor Survey” on a quarterly basis since June 2011.
Monex, Inc., TradeStation Securities, Inc. and Monex Boom Securities (H.K.) have been jointly conducting this survey and observing retail investors’ attitude to financial market conditions in Japan, the U.S. and in China(Hong Kong) on a regular basis.
Executive Summary
Monex Group has stated that its latest survey results strongly reflect recent market trends. A comparison of major stock indices from the end of last year through May 2015 shows particularly remarkable gains in Japan and China, with the United States’ Dow Jones Industrial Average increasing 1.1%, Germany’s DAX Index rising 16.4%, Japan’s Nikkei 225 climbing 17.8%, and China’s Shanghai Composite Index up 42.6%.
Under such conditions, investors in all the regions surveyed heightened their expectations for stock prices in Japan and China (Hong Kong) while lowering their expectations for U.S. stocks.
A major factor behind lackluster stock prices in the United States could be the widespread expectation of higher interest rates in the U.S. In Europe, Japan, and China, central banks are
implementing monetary easing policies, and the need for additional easing may also be considered depending on economic developments.
The United States, on the other hand, is currently wrestling with the question of when to begin monetary tightening, and the U.S. dollar has been appreciating ahead of the tightening, due to the effects of other countries easing their monetary policies.
According to these Global Survey results, investors’ expectations regarding the timing of the FRB’s rate rise vary from region to region. Judging from the most recent comments by FRB chair Janet Yellen and other FRB officials, however, the FRB appears determined to begin increasing rates before the end of the year.
Looking back at the last three phases of monetary tightening in the United States, stock performance remained lackluster for several months to around one year after rate increases, followed by a period in which stock prices rose even more strongly than before the rate increased.
Whether past patterns of stock performance will be repeated or not this time remains an open Monex Global Retail Investor Survey June 2015 question, but assuming they do recur, the period of lackluster stock prices before and after the rate increases will prove to have been the best time to invest to take advantage of the later rise in prices.
Monex Group strongly hopes that retail investors will actively learn from the past to improve their asset management performance.
Summary
Global Survey Results: Survey of Retail investors in Japan, the U.S. and China (H.K.) (1-1) In China (Hong Kong), the forecast diffusion index(*) rose amid continued stock price gains.
Monex Group asked retail investors in each region about their views on world stock markets for the coming three months.
Japanese retail investors’ forecast diffusion index fell for the first time since the September 2014 survey, to 24 points, and the forecast diffusion index of retail investors in the United States also declined, as in the previous survey. However, the forecast diffusion index of retail investors in China (Hong Kong) improved from the previous survey, to 43 points.
This improvement is probably attributable to the strong performance of mainland Chinese stocks, with the Shanghai Composite Index climbing above 5,000 points for the first time since January 2008.
diffusion index (diffusion index): The percentage point of respondents who answered “World stock market prices will increase” minus the percentage point of respondents who answered “World stock market
prices will decrease.”
Expectations for Japan and other parts of Asia that exhibited strong stock price performance improved among retail investors in each region. Monex Group asked retail investors in each region about the most promising region in terms of stock price appreciation in the coming three months. Retail investors in all regions raised their expectations for Japan and Asia excluding Japan from the previous survey (conducted in March 2015).
This may be attributable to the noticeable rise of Japanese and Chinese stocks at a time when U.S. stocks were lackluster and the upward trend of European stock prices halted. Retail investors in all regions had the highest expectations for their own respective regions.
For the first time in since the December 2013 survey, Japanese retail investors’ expectations for Japanese stocks exceeded their expectations for U.S. stocks. Monex Group assumes that Japanese retail investors’ bullishness about the U.S. stock market was tempered by the fact that the U.S. stock market has been lackluster since the beginning of the year and the FRB is expected to raise interest rates, while the Nikkei Stock Average hit 20,000, causing Japanese retail investors to become bullish about Japanese stocks.
For the official results of the survey from Monex Group, click here.