The Wednesday Letter #204 - 1/24/2024

THIS WEEK: Japan Stock Market; January Rally; Egypt Under Pressure; After New Hampshire.

JAPAN STOCK MARKET

The main headlines from Asian stock markets this week are about the relentless decline in Chinese equities. Hong Kong’s Hang Seng index fell briefly below its level of July 1997, the date when the territory reverted to China. Mainland indices are marginally better but are approaching their early 2020 lows. To be fair, some of this nominal performance masks what is in fact a growing total market capitalization and reflects huge share issuance and dilution rather than just underperformance. Nonetheless, the government plans to deploy the equivalent of hundreds of billions of dollars to shore up the market.

Things are looking decidedly better across the sea. The Japanese stock market has been on an up trend since late 2013 and the Nikkei 225 index is now not far from its 1989 record high. That was 34 long years ago when Japan was the rising economic power that the US worried about. Decades of deflation and a rigid financial infrastructure made it difficult for Japanese e…