This book organises the mechanisms and key points for assessing how public money, including GPIF, drives supply and demand in Japanese equities.
Stock prices are not driven solely by corporate earnings. The number and relative strength of buyers and sellers appearing in the market at any given moment also have a major effect. Corporate value forms the foundation over the long term, but it is not unusual for imbalances between supply and demand to push stock prices up or down. Public money can affect the market on a different scale and with different characteristics from individuals and overseas investors, making it important to understand how to read supply and demand.
The main entities that move the huge sums referred to as “whales” include public pension funds such as GPIF, mutual aid associations, asset managers and trust banks. By understanding the rules and conditions under which these funds buy domestic equities, and the circumstances in which they may sell, investors can incorporate the market’s flow into their assessment of market conditions.
Public money, however, does not move solely to raise stock prices, nor is it intended to support specific companies. Its movements are determined by multiple factors, including the policy asset mix, portfolio composition, permitted deviations, exchange-rate movements, demand for pension payments and the decisions of external managers. It is therefore important to use the latest publicly available information as a basis for estimating supply and demand on a probability basis.
Using the metaphor of riding on the back of a whale, this book aims to elucidate the structure underlying the movement of public money by combining diverse sources of information, enabling anyone to conduct their own supply-and-demand analysis and develop trading scenarios. Its stated aim is to cultivate the ability to interpret invisible flows from their traces.