Liquidity rush: Japan, European markets at record highs

MUMBAI: At a time when Indian markets are struggling to move closer to all-time highs, there is a strong bull-run in global equity markets. Japan’s Nikkei and European markets have hit fresh record high thanks to flush of liquidity from global central banks.

“The strong performance of Eurozone and Japanese markets can be largely attributed to the large depreciation in their respective currencies, which in turn, is a result of the QE policies being pursued by their central banks,” said Kotak Institutional Equities report.

“Several Eurozone and Japanese companies derive a large portion of their revenues from overseas markets and their earnings will benefit from currency depreciation,” the report added.

Japan’s Nikkei hit breached 20,000 mark for the first time in 15 years while Hong Kong extended gains for sixth straight session. According to analysts, the rally in Nikkei was has been on the back of demand for equities from domestic institutions and quantitative easing by Bank of Japan last year.

Last October, the BoJ surprised with announcement of increase in purchase of long-term debt. To add to it, Government Pension Investment Fund announced ¥120 trillion plan to increase its exposure to domestic equities.

Similar trend is seen in Europe. The Stoxx Europe 600 index surged over one per cent to close at 409.15 on Thursday, surpassing the previous peak of 405.50.

The rally has been attributed to the European Central Bank’s efforts to stimulate the eurozone economy by buying bonds. According to reports, over $50 billion have been invested into eurozone stock funds while $59 billion has left U.S.