(Updates to add comment from strategist in fourth paragraph.)
Jan. 14 (Bloomberg) -- Foreigners bought the most Japanese stocks ever last year while local individuals sold the largest amount on record amid the best equity rally in four decades.
Overseas investors bought a net 15.1 trillion yen ($146 billion) in Japanese shares in 2013, according to data released by the Tokyo Stock Exchange today. That was the fifth straight year of net purchases and the largest amount since the bourse began compiling the figures in 1982. Domestic investors offloaded a net 8.75 trillion yen, also a record, the data show.
The Nikkei 225 Stock Average surged 57 percent in 2013, its biggest yearly gain since 1972, as Prime Minister Shinzo Abe’s program of fiscal stimulus, monetary easing and economic reforms helped weaken the yen and boost exporters. The data show foreign investors boosted holdings of Japanese equities during the rally and suggest local individuals took profits on their share gains.
“We think net buying by foreigners will continue in 2014, at about 8 or 9 trillion yen for the year,” said Shingo Kumazawa, a market analyst at Daiwa Securities Group Inc. “Supply and demand is a zero-sum game, so when foreigners actively buy, someone has to sell. All sorts of restrictions limit domestic institutions from being active, so individuals are the ones that mainly meet that demand.”
Institutions sold a net 4.76 trillion yen in shares last year and securities companies offloaded a net 508 billion yen, the data show. Trust banks, which also manage pension money, sold a net 3.97 trillion yen, according to the figures.
Foreign investors were net buyers in all but one month in 2013, while domestic individuals were net sellers in every month except August, the data show. Investors from outside Japan make up about 58 percent of the market, while individuals count for 32 percent, the data showed.
The inflows from overseas investors surpassed the previous high in 2005, which preceded a 1.9 percent increase for the Topix the next year.
Foreign investors were net buyers every month during 2005, purchasing a net 10.3 trillion yen in equities for the year, as then-Prime Minister Junichiro Koizumi battled resistance from his own party and won a snap election in pursuit of postal reforms that proponents said would help revitalize the economy. The Topix increased 44 percent during that year.
Abe’s hand-picked Bank of Japan governor, Haruhiko Kuroda, doubled monthly bond purchases to more than 7 trillion yen at his first policy board meeting in April 2013, aiming to spur 2 percent inflation in about two years. Foreigners bought a net 2.7 trillion yen of stocks that month.
About 18 percent of 272 investors surveyed in November by Bank of America Corp. listed Japan as their favorite developed- equity market in 2014, compared with 44 percent for the U.S. and 31 percent for Europe.
--Editors: Tom Redmond, Sarah McDonald