EBC Markets Briefing | Japanese and Chinese equities vie for inflows

Japan's Nikkei 225 index opened higher on Tuesday, extending its gains from the previous session when China markets snapped a nine-day winning streak. EBC Economic Research Findings The index has gained around 17% this year.

Warren Buffett’s favourite Japanese trading houses climbed after he said in his letter to investors the companies follow shareholder-friendly policies that are “superior” to those practiced in the US.

South Korea’s financial regulatory body unveiled new measures to improve corporate guidance on Monday in an attempt to replicate Japan’s rally, but that did little to boost the local market.

Investors who have historically owned Chinese stocks say owning a Japanese firm that either sells to China or is based there is becoming the more politically palatable option given rising between the US and China.

Japan’s semiconductor equipment markets are enjoying strong demand from China, in part due to trade controls by Washington. Tokyo Electron Ltd lifted its guidance for the year on the strength of sales to the world’s second largest economy.

Still some are betting on China's eventual recovery following a raft of stimulus including rate cuts. A record $19.8 billion poured into funds focused on Chinese stocks in the week through 7 Feb, LSEG showed.

The Nikkei index has pared its early gains with 40,000 to cap further rally. The RSI signals overbought condition so deeper correction is on the cards. However, the uptrend remains in place as long as 38,000 is respected.

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