Fund Management

Japanese Equity Enthusiasm Rises In June – Morningstar

Editorial Staff 8 July 2024

Japanese Equity Enthusiasm Rises In June – Morningstar

As far as funds located in Japan were concerned, June was a positive month, with large inflows, figures show.

Enthusiasm for equities in Japan bounced back to more than ¥1.5 trillion (about $10 billion) in June, setting a record high, up from ¥1.46 trillion in May, underscoring how stocks remain popular, Morningstar reported last week. 

Global equity funds strongly attracted net inflows, exceeding ¥1 trillion for the second month in a row, while allocation funds were also “solid,” Morningstar said, increasing net inflows from ¥90 billion to ¥130 billion. 

Not all the news was in one direction: net inflows of Japan equity funds dipped below the ¥10 billion level, the lowest since November 2023 when it suffered net outflows. 

The data suggests that appetite for Japan-focused stock funds, which has risen in recent years as Japanese equities have risen, has its limits, possibly because there is a level of caution coming into the market. The MSCI Japan Index shows that in the period from the start of January to 5 July, total returns (capital growth plus reinvested dividends) were 9.6 per cent; the MSCI World Index of developed countries' equities shows total returns of 13.6 per cent. (These percentage gains are in US dollars.)

Among the monthly ranking of individual funds by net inflows, global equity and US equity funds showed “overwhelming strength,” Morningstar said, but also Indian equity funds continuously demonstrated popularity, with four Indian equity funds ranking in the top 20 individual fund list.

Large-cap funds kept net inflows just under ¥70 billion, down from ¥80 billion, and other (active) funds decreased net inflows only slightly from the previous month. 

Global bonds maintained net inflows, which sharply fell below ¥10 billion from ¥60 billion in the previous month, resulting in halved total net inflows. 

Passive (world) REITs (real estate investment trusts) gained a small net inflow, but all other sub categories faced net outflows. In particular, monthly dividend funds, which used to be popular products, experienced net outflows. Overall, net outflows stayed at the mid-¥20-billion level for the second consecutive month.

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