While everyone has been talking about delevering, the security numbers tell the story. Looking at weekly securities flows in Japan, the net flows back to Japan are huge but it it not the foreigners but domestic investors making a difference. This home bias is what is driving the currency. It is a risk aversion story on the securities side of the capital account.
Japanese selling of bonds was almost ten times greater than foreign buyers. Foreign buying has a seasonality where selling occurs at the end of the month and then is positive during the rest of the month. That pattern has not been in place over the last 30 days where flows have been out of Japan.
Equity flows were mixed with Japanese being net buyers of foreign stocks in the month of October while foreigners have been net sellers since the end of the second quarter. Japanese buyers have been US bargain hunters.
Japanese selling of bonds was almost ten times greater than foreign buyers. Foreign buying has a seasonality where selling occurs at the end of the month and then is positive during the rest of the month. That pattern has not been in place over the last 30 days where flows have been out of Japan.
Equity flows were mixed with Japanese being net buyers of foreign stocks in the month of October while foreigners have been net sellers since the end of the second quarter. Japanese buyers have been US bargain hunters.
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