Nikkei 225
The Nikkei 225 declined by more than 0.45% as traders digested news that Softbank was the Wall Street whale that pushed technology stocks higher. The index is trading at ¥23,092, which is below last week’s high of ¥23,569. Other indices in Asia are also falling, with the Shanghai composite and Hang Seng falling by 0.65% and 0.15%, respectively.
Softbank share price is down by more than 8% as traders react to news that the company was responsible for the rally in US technology stocks. According to the Financial Times, the company poured billions of dollars in equity derivatives that helped push valuations of top tech companies through the roof.
Before last week’s correction, the biggest five technology companies in the US had a market capitalisation of more than $8 trillion. In contrast, the US has a GDP of more than $21 trillion while China has a GDP of $13 trillion.
According to the Financial Times, Softbank has netted more than $4 billion in profits through these derivatives. If the share prices of these companies continue to rise, these profits will continue rising.
However, while these profits are unprecedented, traders in Tokyo are worried that the company is slowly becoming a hedge fund. This helped push the share price lower. Also, the shares dropped because of the recent underperformance of these tech firms.
Softbank share price is trading at ¥5,860.
In addition to Softbank, other weak performers in the Nikkei 225 are SKY Perfect, Dainippon Screen, Yahoo Japan, Kirin, and Tokyo Electron. All these shares have fallen by more than 4%. On the other hand, the best-performers in the Nikkei are Fanuc, NSK, Okuma, and Dentsu.
The underperformance of the Nikkei 225 and other Asian stocks is also because of the weakness in US stocks. Last week, the Dow Jones, Nasdaq 100, and S&P 500 had their first big decline in months. Analysts believe that this weakness could be because investors who are coming from summer are unwinding their profitable positions.
The Nikkei 225 is trading at ¥23,095, which is below last week’s high of ¥23,569. On the daily chart, the price has been in a strong upward trend since March, when it bottomed at ¥16,377. The price is above the 50-day and 100-day exponential moving average and is above the ascending trendline that is shown in black.
Therefore, the index will remain in this bullish trend so long as the price is above the ascending trendline. A move below this line will invalidate this trend because it will send a signal that there are more bears in the market who will be keen to push the price lower.
