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As bets pile up against Japanese stocks, investors with $293 billion in client assets see the pessimism as a signal to buy. History is on their side.
Short-selling on Tokyo?s bourse jumped to the highest on record this month, as the Topix index tumbled 7.7 percent from a six-year high in September. Shares have rallied an average 9.7 percent over the three months following surges in bearish bets since 2009, according to data compiled by Bloomberg.
For Sydney-based AMP Capital Investors Ltd., that?s one reason for optimism. The outlook for company profits is another. Government-backed steps to put a floor under Japanese equities may prove dangerous for short-sellers: the central bank says it?s ready to add stimulus if the economy falters, while on Oct. 20, a Nikkei newspaper report the country?s $1.2 trillion pension fund would buy local shares roused the Topix (TPX) from a three-week rout.
?Fear is hitting extreme levels and it?s time to get into the market,? Nader Naeimi, who helps manage about $125 billion as head of dynamic asset allocation at AMP, said by phone on Oct. 14. ?When these sentiment indicators flash excessive pessimism, it usually suggests we?ve reached the lows.?
Bearish bets accounted for 36.6 percent of all transactions on the Tokyo Stock Exchange by value on Oct. 14, according to bourse data compiled by Bloomberg. That?s the highest since the exchange started publishing the figures in 2008. The ratio was 33.4 percent on Oct. 24. The Topix climbed 1 percent to close at 1,254.28 in Tokyo today.
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