Japanese stocks ahead of earnings are being influenced by trends in US equities, with capital increasingly flowing into strong-performing blue-chip stocks. Meanwhile, stock selection among AI-related names is expected to advance, making this a period for close attention to future market trends.
According to research from Nomura Securities, returns on value factors in Japan and the US have diverged as the US 10-year Treasury yield approaches and rises above 5%. Trends in major factors such as stock-price momentum and market capitalisation have also increasingly differed between Japan and the US, and Japanese equities are considered likely to follow factor trends in US equities.
Against a backdrop of rising interest rates, capital has shifted first in US equities, spreading a sense of confidence in blue-chip stocks, while some analysts also believe that inflows into thematic stocks, including AI names, are no longer as strong as they were. With earnings announcements set to gather pace in the third and fourth weeks of October, stock selection during the period of waiting for earnings results is considered important.
Among AI-related stocks, attention is focusing on the presence of “about-face” stocks, and names with the potential to expand their earnings power as AI becomes more widespread are expected to be favoured. One analysis also suggests that stocks with strong earnings revisions and an improving historical momentum trend could become targets for short-term catch-up.