Investors are worried about the increasing number of newly confirmed coronavirus infections in Japan, as well as the rise in inflation in the US. This could trigger an interest rate increase, which would make dollar assets more attractive.
Foreign investors withdrew more than $10 billion from the Tokyo Stock Exchange in the week ending May 14. It is the largest weekly outflow the Tokyo Stock Exchange has seen since March 2020. About forty percent of this amount related to the stock market, while the rest related to financial derivatives.
Investors have been smirked by the growing number of confirmed coronavirus cases in Japan in recent weeks, but also by the exceptionally high inflation in the United States. This increases expectations that the US central bank will decide to raise interest rates sooner than originally expected. This would also make dollar assets more attractive at the expense of the value of Japanese companies’ shares, especially banks and technology titles.
Tokyo’s main Nikkei index fell 4.3 percent last week, its deepest decline since July last year. Bad sentiment also spilled over on the Hong Kong Stock Exchange, which weakened by half a percent on Thursday, as measured by the Hang Seng aggregate index.
