In the week ending January 17, investors favored Japan and emerging-market equities, witnessing significant inflows of $1.8 billion, the highest in 12 weeks.
Bank of America analysts highlighted the Nikkei's appeal as a beneficiary of "anywhere but China" liquidity.
“Nikkei at 34-year highs, China at 2008 GFC lows (Nikkei was 7k at GFC low, now 36k); true bull in Japan when yen up, stocks up, but in ’24 its prospect of deeper yen depreciation that amps the bulls (note leadership shifting from asset reflation plays i.e. banks to weak yen plays i.e. exporters),” analysts said in a note.
Moreover, analysts noted that Japan’s Nikkei is a “beneficiary of ABC "anywhere but China" liquidity and investors structurally underweight (Japan = 5.5% of ACWI vs. 44% in 1989).”
Meanwhile, European and US stocks experienced selling pressure, with US equity funds facing outflows of $4.3 billion and European funds witnessing a $1 billion pullback.
In the broader market, investment-grade bonds attracted the most significant inflows at $14.1 billion, marking the largest rush since October 2021.
China observed substantial outflows, predominantly led by foreign investors, marking the most significant exodus since 2016, according to BofA.