[Hideki Wajima’s Market Forecast]─August market to be in a stalemate, but the pullback in major semiconductors is a good target in the medium term | Market conditions – Kabutan News

Stock Journalist Hideki Wajima

“The market in August is expected to remain stable, but the recent pullback in major semiconductors presents a promising medium-term opportunity.”

High interest in the Japan-US monetary policy meeting at the end of the month.

The Tokyo Stock Exchange is anticipated to stay within a range in August, influenced by a decrease in market participants during the summer vacation period. With the peak of the first quarter financial results for the fiscal year ending March 2025 approaching, individual stock searches for good performance are likely to increase.

The Nikkei average has only seen an increase on one day since reaching an all-time high on July 11th, with the decline over the period up to the 26th exceeding 10%. This decline is primarily due to supply and demand dynamics, notably foreign investors selling futures after purchasing during the rise. An autonomous rebound is likely. The predicted range for the Nikkei average stock price is between 37,500 yen and 40,000 yen. There is a sense of stagnation above 40,000 yen, with sellers likely waiting for a rebound at this level.

One key date to watch is the announcement of the US FOMC (Federal Open Market Committee) results on July 31st. There will be no FOMC meeting in August, with the next one scheduled for September 17-18. The market is anticipating the initiation of interest rate cuts in September, leading to significant interest in whether this groundwork will be laid in July. In Japan, the results of the Bank of Japan’s Monetary Policy Meeting will also be announced on the 31st, accompanied by a press conference from Governor Ueda. A reduction in government bond purchases is anticipated, although the likelihood of an interest rate hike remains low. Governor Ueda’s stance on wage increases and the price outlook will attract attention. The next meeting is also set for September 19-20.

In August, the US is scheduled to release various economic indicators including the ISM Manufacturing Index on the 1st, employment statistics on the 2nd, the ISM Non-Manufacturing Index on the 5th, the Consumer Price Index (CPI) on the 14th, the presidential election and Democratic National Convention (where party candidates will be officially decided) from the 19th to the 22nd, and the FOMC minutes on the 21st. Additionally, semiconductor giant Nvidia is expected to release its financial results for May through July in mid-August.

In Japan, the announcements related to quarterly financial results for April to June will peak around mid-month. At the beginning of the period, companies predicted a 4% decline in net profit for the fiscal year ending March 2025, and there will be close attention on how much recovery may occur. As of the 23rd, the forecast for the Nikkei average stock price is 2,361 yen per share, with a PER of 16.8 times. Significant financial results set for release on the 1st include reports from Toyota Motor Corp., Mitsubishi Corporation, Nippon Steel Corporation, Mitsubishi UFJ Financial Group, Nintendo, and others, with various companies scheduled for the 5th, 6th, and 7th.

● Focus on railway-related inbound tourism

Semiconductor-related stocks are currently in a correction phase, largely due to tightened export controls on advanced products to China and Trump’s remarks regarding Taiwan. However, the restrictions on advanced product exports remain, so the actual impact is expected to be limited. Depending on Nvidia’s financial outcomes, this landscape may be reassessed. Stocks like Disco, Tokyo Electron, Advantest, Hoya, and SCREEN Holdings may represent medium-term targets for rebounds.

The US presidential election is facing turmoil as incumbent Biden has withdrawn. However, following the shooting incident involving former President Trump, reports indicate that Trump is leading. Vice President Kamala Harris is seen as the frontrunner for the next Democratic candidate, but should she be selected, specific pledges are unlikely. The “Trump trade,” focusing on stocks related to his promoted policies, may persist. In infrastructure development, companies like Komatsu, Hitachi Construction Machinery, Kubota, Sakai Heavy Industries, and others could advocate for Japan to enhance its defense budget, along with companies like Mitsubishi Heavy Industries, Kawasaki Heavy Industries, IHI, Tokyo Keiki, among others.

So far, Harris has supposedly prioritized policies like addressing climate change and strengthening the Affordable Care Act (Obamacare). She may also show interest in electric vehicles and hydrogen, as seen with companies like Nidek and Iwatani Corporation.

The influx of foreign visitors to Japan continues to rise, making inbound tourism-related businesses increasingly attractive. Within this context, we aim to concentrate on railway-related stocks. JR Kyushu, following its application for a fare increase from April 2013, has seen its shares rise to their highest price since being listed. While retail stocks, such as department stores, are performing well due to inbound tourism, some railway stocks have dropped to their lowest levels since the start of the year, leading many to believe this has already been priced in. Movements in JR Kyushu’s share price are expected to generate ripple effects. Additionally, JR East Japan, JR Central, JR West, and other companies like Tokyu, Keihin Express Railway, Odakyu Electric Railway, and Keio Electric Railway are currently viewed with little concern for potential downturns.

(Written on July 24 / Next article will be published on September 1)

■Hideki Wajima
Stock Journalist
Joined Nippon Kangyo Kakumaru Securities (now Mizuho Securities). After serving as a reporter for Kabushiki Shimbunsha (now Morningstar), he joined Radio Nikkei in 2000. He has been involved with the Tokyo Stock Exchange Press Club and serves as a commentator. He regularly appears on Radio Nikkei’s “Market Press” and Nikkei CNBC’s “Daily Focus” every Wednesday. He is a council member of the Japan Association of Technical Analysts and a Certified Technical Analyst (CFTe) of the International Federation of Certified Technical Analysts.

Kabutan News

August Market Overview: Expectations and Insights from Stock Journalist Hideki Wajima

Market Sentiment in August

The Tokyo Stock Exchange is projected to navigate within a range during August, a period marked by a dip in market activity due to summer vacations. As the first quarter financial results for the fiscal year ending March 2025 arrive, investors are anticipated to selectively hunt for stocks demonstrating favorable performance.

The Nikkei average stock price has seen limited upward movement since achieving an all-time high on July 11. It experienced a significant decline exceeding 10% up to July 26. This downturn is largely attributed to supply and demand dynamics, particularly with foreign investors selling futures they previously acquired during the market uptrend. An autonomous rebound is expected, with forecasts indicating the Nikkei average will fluctuate between 37,500 yen to 40,000 yen. The resistance level above 40,000 yen suggests that sellers may be ready to capitalize on rebounds.

Key Financial Announcements to Watch

Attention should be directed toward the July 31 announcements of the US FOMC (Federal Open Market Committee) and the Bank of Japan’s Monetary Policy Meeting. Notably, the absence of an FOMC meeting in August shifts focus toward September 17-18. The market anticipates a potential onset of interest rate cuts in September, creating high interest in any preparatory comments made during the July meeting.

In Japan, the Bank of Japan’s subsequent meeting, scheduled for September 19-20, will also draw significant attention, particularly concerning Governor Ueda’s perspectives on wage increases and inflation forecasts.

Date	Event
August 1	ISM Manufacturing Index Release
August 2	U.S. Employment Statistics
August 5	ISM Non-Manufacturing Index
August 14	Consumer Price Index (CPI) Release
August 19-22	Presidential Election & Democratic National Convention
August 21	FOMC Minutes Release
Mid-August	Nvidia Financial Results Announcement

Corporate Earnings Reports

The middle of August marks the peak for quarterly earnings announcements in Japan, particularly for companies reporting April-June results. Initially, corporations anticipated a 4% decline in net profits for the fiscal year ending March 2025. Monitoring will shift to assess the actual outcomes versus the initial forecasts, especially with major firms like Toyota Motor Corporation, Mitsubishi Corporation, and Sony Group set to report their financial performances.

Sector Focus: Semiconductor Stocks and Inbound Tourism

Market Correction in Semiconductor Technology

Semiconductor stocks are undergoing a correction phase amid tightened export controls on high-tech products heading to China and former President Trump’s remarks concerning Taiwan. Although restrictions are in place, the actual impact appears limited. Depending on Nvidia’s financial performance, these stocks may attract renewed investor interest.

The following key semiconductor stocks warrant attention:

• Disco (6146)
• Tokyo Electron (8035)
• Advantest (6857)
• Hoya Corporation (7741)
• SCREEN Holdings (7735)

These companies are worth focusing on as they may present medium-term investment opportunities following pullbacks.

Impact of Elections on Investment Strategies

The political landscape surrounding the upcoming U.S. presidential election is unpredictable, especially following President Biden’s withdrawal. Despite the ongoing challenges, former President Trump currently leads the race. Vice President Kamala Harris remains a strong Democratic candidate but has yet to present concrete pledges. The evolving situation could give rise to the “Trump trade,” where investments gravitate towards stocks aligned with his policies, particularly in infrastructure development.

Recommendations for Potential Investments

In the infrastructure domain, focus on stocks of companies such as:

• Komatsu (6301)
• Hitachi Construction Machinery (6305)
• Kubota Corporation (6326)
• Mitsubishi Heavy Industries (7011)
• Kawasaki Heavy Industries (7012)

As Vice President Harris emphasizes policies related to climate change, electric vehicles, and hydrogen, interested parties should also explore:

• Nidek (6594)
• Iwatani Corporation (8088)

Inbound Tourism and Railway Stocks

The re-emergence of foreign visitors to Japan continues to surge, amplifying the attractiveness of inbound tourism-related enterprises. Railway stocks present an appealing investment avenue given their essential role in this sector. Notable observations include:

JR Kyushu (9142) has seen its share prices rally significantly, marking the highest prices since its listing following its application for fare increases. Although retail stocks, particularly department stores, have shown strength due to inbound tourism, certain railway stocks have dipped to their lowest prices since early 2023 – a development that market analysts view as already factored into current valuations.

The trajectories of key railway stocks—including JR East Japan (9020), JR Central (9022), and JR West (9021)—are critical, alongside the performance of Tokyu (9005) and Keihin Express Railway (9006).

Market Forecast and Investment Strategies

In light of the various upcoming events and anticipated earnings releases, investors are advised to maintain a diversified investment portfolio. Keeping an eye on semiconductors, transportation, and broader economic indicators will prove essential in navigating the fluctuating market landscape.

By leveraging insights from events, earnings reports, and geographic trends, an informed strategy incorporating established and emerging stocks could yield substantial returns in the current context.

Written by Hideki Wajima, Stock Journalist (July 24)