Japanese Stocks Surge By Most In 27 Months JPY & JGBs Shrug

A miss for the trade balance (extending the slide into bigger and bigger deficits), positive 'revisions'  to rear-view mirror data on nominal GDP, a world of carry traders looking for a better exit point (or staring at margin calls), and more PR coverage of Abe's third arrow have created the perfect short-squeeze storm in Japanese stocks. While USDJPY managed to creep back above 98 (trading in a relatively modest 100 pip range), and JGBs rapidly recovered from early negative-correlated-to-equity-based losses to trade 1-2bps lower in yield, the broad Japanese equity market - TOPIX - is up almost 5%. This is it's best day since March 2011 and second-best day since Lehman. S& P futures are up a mere 2 points, Treasury futures are unchanged, and Gold is modestly higher. So simply put it, Japanese stocks are on their own tonight in a land of Abenomics as every other asset sits idly by.

Oops on the trade balance...



 

but that doesn't matter... but notice that each time realized volatility has exploded like this, the market has continued it downward trajectory - one reason is simply the VaR shock we have discussed in depth as risk budgets (or the margin hikes we have seen) force position reduction...



These large bounces are not unprecedented in this downturn - we have seen three ~30% retracements now...



 

lead rebound

•

resistance at $1.05 and eventual downside risk towards

$0.80

We believe that STI’s correction that started from May 22 has

ended at 3184 last Friday after US’s May job data alleviate

concerns about an imminent cut back in FED stimulus. At the

same time, STI’s forward PE valuation has now fallen below

the 13.9x (average) 12-mth forward PE level at c.3287 and is

a ‘mere’ 80pts away from touching the 13.1x (-0.5SD) 12-

mth forward PE level at c.3100, which makes local blue chips

attractive. . The rebound has the potential to reach about

3300 eventually with immediate resistance at 3225.

Defensive, yield and interest rate sensitive stocks that rocked

the STI lower in the past 2-3 weeks are likely to lead the index

rebound. SingTel, OCBC, DBS, UOB, Jardine Matheson, HK

Land, Capitaland and GLP are the 8 component stocks that

each had at least a 10pt negative impact on the STI in the

current sell-down.Noble Group – Technically weak with immediate

ozone2002      ( Date: 10-Jun-2013 08:56) Posted: Reversal for Nikkei.. after reporting gd GDP results and exceeding surplus Nikkei 225 13,294.07 416.54 +3.41%

Reversal for Nikkei.. after reporting gd GDP results and exceeding surplus