Tokyo -(Jiji Press)
Tokyo stocks are expected to stay on a firm note in the new year, supported by continued robust earnings of Japanese companies on the back of a recovery in the global economy, analysts said.
But market players will need to be vigilant against the risk of a market downturn triggered by concerns over the course of the Bank of Japan’s monetary easing policy after the envisaged market advance, some analysts said.
In 2018, a majority of analysts expect the Nikkei average to peak near 25,000 around spring, when business scorecards for fiscal 2017, which ends in March, are slated to be released by major Japanese companies, with its downside being firm around 21,000.
The Tokyo stock market will stay in a “goldilocks environment,” with solid returns while avoiding losses and bubbles, as monetary easing measures, as well as the global economic recovery, which bolstered corporate earnings performances, are expected to remain in place, said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management Co.
The market’s downside will continue to be underpinned by expectations for purchases of exchange-traded funds by the BOJ, Ichikawa predicted.
Reflecting fiscal 2018 corporate earnings forecasts, the Nikkei will move between 22,000 and 27,000, Hideyuki Suzuki, head of the investment market research department at SBI Securities Co., forecast.
The key market gauge “could recover 30,000 if the price-to-earnings ratio [of component issues] rises further,” Suzuki said.
But “if the pace of corporate earnings growth turns out slow or falls short of market expectations, stocks will meet with heavy selling,” Suzuki warned.
The market may tumble “if a sense spreads that stock prices have peaked out,” he also said.
Investors “may find the [market’s] ceiling low,” Yoshihiko Tabei, chief analyst at Naito Securities Co., said.
, predicting that stocks will lose ground to some extent through February due to a dearth of major buying incentives.
Tabei said, however, that the market will gain upward momentum from March amid hopes for robust corporate earnings.
According to his scenario, the Nikkei will reach around 24,500 in May or June after strong earnings are confirmed.
But “the Nikkei will unlikely break the 25,000 line as it already gained about 4,000 points this year,” Tabei stressed.