Make no mistake, we have had our fair share of laughs at the expense of China’s equity mania, with the millions of new trading accounts opened by semi-literate housewives and security guards-turned day traders serving as the anchor for many an amusing post.
But as it turns out, China isn’t the only place where housewives are keen to express their view on financial markets because as you can see from the below, ‘Ms. Watanabe’ is positioning for a stronger yen even as Mr. Kuroda plunges Japan further into the largest ponzi scheme in the history of mankind in an effort to stoke hyperinflation to 'rescue' the country from a decades-long battle with deflation.
Via Nikkei:
Japanese day traders, colloquially and collectively known as "Mrs Watanabe", are buying the yen as it nears eight-year lows, suspecting that policymakers would be reluctant to let the currency fall further as it would provoke criticism at home and abroad.
Last week, net dollar buying positions on the Tokyo Financial Exchange, Japan's largest margin trading platform, had fallen almost 60 percent from a high hit in January, to stand among the lowest levels seen in the past year.
At Gaitame.com, another platform popular among margin FX traders, traders have even gone long in yen for the first time since late 2012, when Prime Minister Shinzo Abe was voted into power promising to reflate the economy through massive monetary stimulus, said Takuya Kanda, senior researcher at Gaitame.com Research…
So far at least, it looks like Japanese housewives may be getting squeezed because the JPY just hit an eight-year low against the dollar...
...but 'Ms. Watanabe' is a contrarian soul and apparently won't be deterred...
Last week, the dollar finally broke out of its long-held, tight range between 119 and 121, edging up near the eight-year high of 122.04 yen touched in March.
Given the breakout, the dollar/yen's technical outlook is bullish, usually a good time for day traders to buy dollars.
Yet, Japanese day traders are selling the dollar instead.
Whether that's a good idea ahead of a widely-anticipated Fed rate hike and expectations that the BoJ will ease further in the event wage growth continues to disappoint and disinflationary pressures persist is certainly debatable but one thing is for sure, private equity has benefited handsomely from stakes in publicy-listed Japanese companies as Kuroda's multi-trillion yen plunge protection has done wonders to help the Nikkei levitate. Reuters has more:
U.S. buyout funds Bain Capital and Cerberus Capital Management sold big stakes in two Japanese companies as the stock market surges - taking profits and avoiding an expected bout of volatility if the U.S. Federal Reserve raises rate later in the year, investors said.
The buyout specialists' sales came as the market capitalization of shares listed on the Tokyo Stock Exchange's main board hit a record high last week, surpassing the previous peak hit in December 1989, as Prime Minister Shinzo Abe deployed pro-growth economic policies to boost investor sentiment.
U.S. buyout firm Bain Capital is selling down its 70 percent stake in Japanese restaurant chain Skylark Co to less than half.
Skylark shares closed at 1,685 yen on Tuesday, 40 percent above the 1,200 yen at which Bain sold the stock in an initial public offering last year.
U.S. fund Cerberus last week launched the sale of up to $878 million worth of its shares in rail operator Seibu Holdings
"Recent sell downs of shares held by those buyout funds is a reflection of the surge in Japan's stock market," said Soichi Takata, head of private equity at Tokio Marine Asset Management Co. "But buyout firms are also probably mindful of the possible increase in market volatility later this year when U.S. interest rates begin to rise."
Incidentally, Paul Singer is also exiting"ripe" positions in Japan:
Real estate securities also continues to be an area of current deployment of capital in new situations, but the deployment is more than offset by liquidations of ripe positions in certain markets, especially Japan.
Should 'lift-off' in the US stoke volatility in Japanese equities you can certainly expect the BoJ to move in with still more ETF (and perhaps individual stock) purchases because after all, you can't designate your $100 billion equity book as "held-to-maturity", meaning Kuroda will be forced to keep up the 35 billion yen daily market interventions for as long as absolutely possible lest a sell-off should blow a massive hole in the central bank's balance sheet and that means running the printing presses until they begin to smoke and short circuit. What that will mean for all of the 'Ms. Watanabes' betting on a resurgent yen remains to be seen, but it will likely be supportive for Japanese equity markets which will help PE giants like Carlye Group take portfolio companies like Tsubaki Nakashima Co public and reap hefty profits in the process:
While there are not many public company shares held by private equity firms in Japan, U.S. buyout fund Carlyle Group owns almost all the shares in ball bearing maker Tsubaki Nakashima Co and the buyout fund could list the shares in the near future after failing in 2012, calling off an initial public offering of the company citing market conditions.
For Carlyle in Japan then, it truly is "all ball bearings these days."
