A year ago, we noted that The Bank of Japan (BoJ) was a Top 10 holder in 90% of Japanese stocks. In December, we showed that BoJ was the biggest buyer of Japanese stocks in 2016. And now, as The FT reports, the real "whale" of the Japanese markets is stepping up its buying (up over 70% YoY) entering the market on down days more than half the time in the last four years.
Since the end of 2010, The FT notes that the BoJ has been buying exchange traded funds (ETFs) as part of its quantitative and qualitative easing programme. The biggest action began last July, when its annual acquisition target was doubled to ¥6tn. Since then, the whale designation has seemed pretty obvious: the central bank swallows a minimum of ¥1.2bn of ETFs every single trading day (tailored to support stocks that further “Abenomics” policies), and lumbers in with buying bursts of ¥72bn roughly once every three sessions.
Some traders say the bank’s supposedly targeted buying has cushioned the whole market. Last year, foreign investors were net sellers of ¥3tn of Japanese shares – a retreat that might have decimated benchmarks had the BoJ not swum in with ¥4.3tn of support via ETFs.
In the afternoon sessions on days the BoJ comes in big, the average return on the index is about 14 basis points higher.
Since the annual quota was increased to ¥6tn, Nomura says, the BoJ has provided a cumulative boost to the Nikkei of about 1,400 points.
But, as we've noted in the past, it appears to be the flow, not the stock, that is the big driver…
As in a casino, The FT's Joe Lewis concludes, the whale definition may hinge less on the cash on the table and more on the psychological impact on other gamblers. The BoJ has been at the game long enough for the market to know it reliably buys on weakness.
Of the 1,038 business days between April 2013 and March 2017 there were 449 sessions where the market was down: the BoJ bought on more than half of them. Whale or not, investors are now primed to think they are swimming with one.
So given that we know SNB is extremely active in stock markets, and The BoJ is the Japanese stock market, does anyone realistically doubt The Fed is/has been active?