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Nikkei 225 index: is it safe to buy Japan stocks in May?

The Nikkei 225 index held steady close to its highest level since September last year ahead of the upcoming Softbank earnings. The index, which tracks the biggest Japan companies, rose to ¥29,200, which was ~13% above the lowest point this year.

Softbank earnings ahead

The Nikkei 225 index has done well this year for three key reasons. First, the new Bank of Japan (BoJ) governor has committed to maintaining the status quo of easy money. He decided to leave interest rates unchanged in the last meeting and pointed to more easing. 

Second, Japan stocks have attracted foreign investors who were attracted by Warren Buffett’s investments in the country. Buffett has already made over $4.4 billion in profits from his investments in Japan’s trading companies. He has now increased his stake in the five sogo shoshas, which he sees as well-run undervalued companies. 

Third, Japan is seen as a safe haven during the collapse of America’s regional banks and the commercial real estate sectors. Regional banks like First Republic and Silicon Valley Bank have all collapsed in the past two months.

Further, commercial real estate in Japan is doing better than in the US. Data published on Thursday showed that Tokyo’s vacancy rate fell to 6.11% in April, the lowest point since 2021. As I wrote here, the commercial real estate sector in the US is on the verge of collapse.

The next key Nikkei 225 news to watch will be the upcoming Softbank earnings. Analysts believe that the company’s business did better in Q1 as technology companies rebounded. In the US, the Nasdaq 100 index has moved to a bull market. Softbank stock price has jumped by over 7% this year.

The most recent Softbank news is that the company’s mobile unit has joined the artificial intelligence race as it seeks to create a ChatGPT clone. Also, the company is nearing a deal to sell Fortress to Mubadala in a $3 billion deal.

Watch here:

Nikkei 225 technical analysis

Nikkei chart by TradingView

The Nikkei index has been in a strong bullish trend in the past few weeks. As it rose, the index jumped above the key resistance point at ¥28,518, the highest point on November 22. 

It is also nearing the 78.6% Fibonacci Retracement point while the index has jumped above the 50-day exponential moving average (EMA). Therefore, the index will likely continue rising as buyers target the next psychological level at ¥30,000.

The post Nikkei 225 index: is it safe to buy Japan stocks in May? appeared first on Invezz.

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