The annual Golden Week holidays threaten to give investors fits when adjusting positions in response to coronavirus-related newsflow, which could heighten volatility over the next few weeks.

This year’s string of spring holidays includes four closely timed official holidays — and market closures — on April 29 and from May 4 to 6. What is usually one of the nation’s most popular vacation periods, however, will be drastically different this year as businesses stay shut and nonessential travel withers to nothing amid the pandemic.

Adding to concerns is Tokyo Gov. Yuriko Koike’s proposal for large companies to attach additional holidays to Golden Week to encourage employees to stay at home for even longer.

The operator of the Tokyo Stock Exchange has pledged to keep the market running even in the event of a lockdown. But even the four regular holidays may complicate investment actions at a particularly sensitive time.

Among particular news market participants may want to react to is the central government’s decision on whether to extend the state of emergency, which is expected to be made during Golden Week.

Observers are divided over whether an extension of the measures would be positive or negative for the stock market. The four holidays also fall in the middle of the nation’s most important earnings season of the year.

Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co., sees no chance of economic activity restarting from May to June as infections continue to rise.

“Japan is behind schedule as compared with other countries that have rigorously tested cases.” With companies postponing results and shareholder meetings, investors don’t have a schedule to determine company valuations.

The stock market may slump again in from August to September, with the Nikkei 225 possibly dipping below ¥17,000 after economic data reveal the impact the pandemic had on the April-June quarter, said Hiroshi Matsumoto, head of Japan investment at Pictet Asset Management Ltd.

Whether the government extends the emergency order will be key, as an equity sell-off may occur if the order is extended for another month.

“The government is asking us to refrain from unnecessarily going outside — I think a similar idea goes for investors: They may have to make sure they don’t have unnecessary positions ahead of the long holiday.”

Retail investors and hedge funds may be able to use overseas futures trading, but domestic institutional investors have a harder time with such orders due to compliance issues over working from home, said Takeo Kamai, head of execution services at CLSA Securities Japan.

Expecting to see “some unconventional moves” in equities due to a new “stay at home and have nothing to do so let’s get involved with the stock market” type of investor. Outside of commodity trading advisors and macro hedge funds that react to headlines, trading will be limited. Foreign traders are likely to stay on the sidelines or just readjust portfolios, said Justin Tang, head of Asian research at United First Partners.

The general consensus is that the government will extend the state of emergency; if the order is lifted it may trigger downside risk for the stock market, he said.

Investors will likely close some positions in the run-up to the holidays, or at least increase hedges against their portfolios. Since the emergency order in Japan “lacks teeth” and investors are aware of this, it won’t affect investment decisions, he said.

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