After the worst start to a year on record, Japanese stocks are approaching levels that in the past have proved to be springboards to recoveries.

The rout that’s erased more than $300 billion from Japanese equities in 2016 sent bearish bets to historic levels and pushed valuations down 21 percent from last year’s highs. A gauge of relative strength in the Topix index has dipped below a key level, and other technical indicators are flashing bullish signals. Nomura Holdings Inc.’s Shoko Tani is still waiting for stocks to hit bottom.

“No matter what technical measures you take, they all point to a rebound,” says Tani, chief technical analyst, equity research, at Nomura. “But it hasn’t happened.”

Japan’s equities have been hit hard in the global selloff as investors take flight from risky assets amid concern about China’s market turmoil and the rout in oil. The Topix is down 11 percent for the year, erasing its 9.9 percent advance for 2015.

Hopes for a turnaround emerged on Wednesday last week as the Topix jumped 2.9 percent, the most in three months. That rally was short-lived, and shares plunged as much as 4.1 percent the next day. A rebound in the Standard & Poor’s 500 Index failed to light a fire under the Japanese market on Friday, with the Topix erasing gains to end the week with a 3.1 percent loss.

Tokyo bears have been busy amid the slump. Short sales accounted for more than 40 percent of Japanese equity trades on all but one day in 2016, a level that had never been topped before September.

“Forty percent is abnormally high,” says Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. “No matter how cheap stocks are or how much they’ve been oversold, investors can’t get involved at that level. You just have to surrender.”

Elevated levels have, in the past, preceded advances. The Topix bottomed when bearish bets spiked to a record 43.4 percent on Sept. 29, before the index rebounded 17 percent through a Nov. 24 peak. For Otsuka, the ratio needs to fall to about 35 percent before investors can start thinking about a rebound.

A measure watched closely by technical analysts suggests stocks are oversold. The 14-day relative strength index on the Topix slipped below 30 on Jan. 8 and then climbed back above it on Wednesday. That level is used by some traders as a signal that shares are poised for a rebound. The index last dropped below 30 in August and September before rallying.

“Do I think we’re technically oversold? Yes, but I wouldn’t be picking up yet,” said Kay Van-Petersen, a strategist at Saxo Capital Markets in Singapore.

“Based on the RSI, yeah, you start buying, but it doesn’t mean we can’t go to 15 or 10. For people who like to buy on over-extension or dips, maybe you start putting some money to work, but again I don’t think it’s the same situation that we had in September.”

The market selloff is certainly making Japanese stocks look cheaper. The Topix trades at 13.8 times estimated earnings, down from a high of 17.4 last year and below a five-year average of 14.7. The Standard & Poor’s 500 Index is priced at 15.3.

Since the end of 2012, the P/E ratio for the Topix hasn’t remained below 14 for long before equities rebounded. The longest stretch was at the end of March 2014, when it took more than two months to climb back above 14, just as the Topix embarked on an 18 percent surge amid optimism over corporate earnings and government stimulus.

Analysts say the valuation issue is complicated by a rising yen and U.S. interest rates. The currency has jumped 2.5 percent versus the dollar this year, trading at about ¥117.30 per greenback.

“At the moment we’re fairly cheap,” says Tomoichiro Kubota, a senior analyst at Matsui Securities Co. He says stocks are fine around this level, but if the U.S. holds off on expected rate increases because of volatile markets or stagnating consumption, they could strengthen further. “If that happens, EPS may fall significantly.”

For investors looking for an end to the equities rout, Saxo Capital’s Van-Petersen says trying to time a rebound is “like grabbing the wind.” He predicts further volatility ahead.

“When does it stop? When there’s more blood on the streets.”

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