Growing concerns over the impact of the trade war between the United States and China on global trade and on local Japanese tech firms have pushed foreigners to sell Japanese stocks.
Company stocks in the country have predominantly been sold by foreigners, who are the net sellers for the third week ending May 24.
Apart from the worries over the general impact on the economy, investors are worried that escalations in the Sino-U.S. trade dispute could have a drastic impact on second-quarter earnings of local firms, especially tech stocks.
Data from stock exchanges in Japan show that foreign investors had sold Japanese stocks worth 489.2 billion yen net (roughly $4.46 billion) last week. The sales also included cash equities and futures.
According to the data, overseas investors reportedly sold net 409.3 billion yen in Japan’s derivative markets. The exchanges also recorded sales from foreigners in the cash markets totaling to 79.9 billion yen.
A look at foreign flows into the Japanese stocks market shows a remarkable decline over May, especially after the U.S. slapped a 25% tariff on $200 billion worth of Chinese goods going into the American market.
There had been a lot of optimism in the market after first-quarter earnings showed some stocks were poised for higher returns in the second quarter. However, that has since died off since the China-U.S. trade talks stalled and retaliatory rhetoric dominated since May 10.
The positive outlook that had boosted some of the risky assets, including Japanese shares is no longer there. What started off as fears the beginning of the year has been replaced by tangible jitters about the potential bloodbath in the stock markets.
Shares of global tech companies also feel pressure, going back to a decision by the United States to blacklist Chinese telecoms company Huawei. The pressure went a notch higher last week when a subsequent report stated that the U.S. would impose similar sanctions on Hikvision, a Chinese-based video surveillance firm. The Nikkei index fell 0.63% in the week of May 20-24, while the Topix slid 0.84%- the third consecutive week of declines.