Japanese Stock Market Nosedives Under Stress Of Sovereign Solvency Fears

In his ranking of 40 global stock markets, Robin Griffiths, highly regarded analyst of Cazenove Capital, told CNBC “the Nikkei 225 Index remains resolutely in 40^th position as actually the one to avoid relative to the others”. The falling highs and lows of the Nikkei 225 “technically say ‘avoid’”, he said, adding that India, China, and Brazil are the best investments.

The interview with Griffiths is lower down, but first a chart of the Nikkei 225. (^N225) The Index has been in a downtrend since August and is on course to record a fifth consecutive down-week by the close of today, with today alone down by more than 3% so far. The weakness in Japanese stocks coincided with a surge in the price of credit default swaps (CDSs) on Japanese government bonds (JGBs) - under stress of sovereign solvency fears. Also, core consumer prices were down 2.2% in October relative to a year earlier, as deflation remains firmly entrenched in the Japanese economy.

The chart below shows the Nikkei 225 on a knife’s edge right on its key 200-day moving average, having already breached its 50-day average a few weeks ago. The significant underperformance of the Nikkei 225 versus the Dow Jones World Index since April is shown in the bottom section of the graph.

Source: StockCharts.com

Back to Robin Griffiths’s commentary:

Source: CNBC, November 23, 2009.

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