As foreigners pile into Japan’s steepest stock market rally in years, local investors have been furiously cashing out or even betting against what many see as the beginning of a long-overdue era of profitability and returns.
The Nikkei share average’s (.N225) closed out its best month in 2-1/2 years on Wednesday, riding a wave of foreign cash and optimism for corporate reform that has taken it to heights not seen since the country’s asset bubble burst three decades ago.
Yet Japanese investors have been heavy sellers. In April and May, domestic outflows totalled around 2 trillion yen ($14.81 billion) for individual investors and over 2.2 trillion yen for Japanese institutions.
While foreign investors are excited about the prospect of a new era of growth in corporate Japan, domestic investors are eager to catch any profits they can, sticking to a strategy born out of decades of fleeting rallies.
That means future gains may rely on foreigners, who are bullish but notoriously slow to act in size and wary of a market that’s been disappointing for a generation.