The Nikkei 225 is currently trading at around ¥66,000. The Middle East, AI, semiconductors, interest rates and PER trends are cited as factors behind the decline from its June high, while a defensive dividend strategy and a risk reversal proposal are presented.
The Nikkei 225 reached an all-time high of ¥72,831 in June, but is currently trading at around ¥66,000, representing a widening gap from the peak. The article points to a reversal of the factors that had supported the market's rise.
The key factors are organized into four areas: renewed tensions in the Middle East and the continuing impact of higher oil prices; the concentration in and subsequent pullback of AI and semiconductor stocks; upward pressure on U.S. and Japanese interest rates; and the fact that the Nikkei 225's PER is not extremely high compared with historical levels. These factors are said to be pulling the market between risk and perceived undervaluation.
As a current market range, the assumed PER for the Nikkei 225 is centered on 17 times, with a range of 15.5–18.5 times and an index range of approximately ¥58,000–¥70,000. The view presented is that the index could move up or down depending on developments in the Middle East and the interest-rate environment.
A strategy of pursuing dividend income from defensive stocks is proposed, with Sony Financial Group, Daito Trust Construction, SUBARU, JFE Holdings and Honda among the stocks cited. Specific options strategies are also introduced, including a risk reversal involving selling calls and buying puts on ETF 1321, which tracks the Nikkei 225.