Japan's fall natural after 80% rally in 6 months: AMP Cap

The Japanese share market will recover, though not straightaway, but in the months ahead, says Shane Oliver of AMP Capital Investors.

In an interview to CNBC-TV18, Oliver says, the Japanese share market rose sharply over six months and any market that goes up that quickly, will have a sharp correction at some point. Also Read: Deeper correction seen on global news, rupee: Dalton Cap
He feels bull markets are often characterised by steady advances and as investors get long on the markets, one needs a bit of bad news to cause a sharp correction. Also, he adds that it may be wise to take profits and the outlook suggests that it is a bit of blind sell off as some investors take profits. Below is the verbatim transcript of Shane Oliver's interview on CNBC-TV18 Q: There is a complete chaos in the Japanese market at this point. How have you read the developments and would you be nervous? Do you think this will just pass?
A: I think this will just pass. The Japanese share market rose 80 percent over six months. Any market that goes up that quickly will have a sharp correction at some point and this is it. Bull markets are often characterised by steady advances and as investors get themselves long, you just need little bit of bad news to cause a sharp correction. But when you look at the Japanese fundamentals, the market doesn't look overvalued to me. It is around fair value. But with the yen having fallen so far and likely to boost earnings over the course of the year, we will see the Japanese share market recovery resume. Not necessarily straightaway, but in the months ahead, Japanese share market will start heading back up again. Q: There has been no recovery in the Nikkei. Currently it is at the low point of the day, it closed down 7.3 percent, biggest fall in two years. Nikkei has run up around 40 percent in the past on a year-to-date basis. For today in particular, what exactly plagued the Nikkei?
A: We don't know what everyone else is talking about. But usually when such things happen, you need a slight trigger to cause the market to come down and then people might be trying to take profits.
The Japanese share markets are up 40 percent depending at which time horizon, but year to date it was up 40 percent. Over six months, it is up 80 percent. So, many investors would have been thinking well, we do not know if this is a top or not, but it might be wise to take profits. So, there is not a lot of consideration given the fundamentals, though the outlook is just a bit of blind sell off as some investors take profits.