Citi flags risk of near-term correction in Japanese equities
Invesitng.com - Analysts from Citi on Wednesday flagged the risk of an imminent correction in Japanese equities, observing that Japan's equity market has been fluctuating since mid-March, with its performance gap with the US market widening.
They suggest a near-term investment strategy focusing on stocks with low beta and low volatility, high dividend yields, and those that are uncrowded trades. This approach, according to Citi, could prove promising in the current market scenario. Additionally, while US stocks have been propelled by impressive rallies in the so-called"Magnificent Seven" stocks, momentum in Japan's tech stocks has been waning.
Given the current circumstances, Citi warns of the risk of a near-term rebound in lower-than-expected US long-term interest rates, which could trigger a correction in Japan stocks, emphasizing that if US long-term interest rates decline due to further weakening of economic indicators, a risk-off trend is likely, triggering a decline in both interest rates and stock prices.
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