Investing.com – Japanese stocks’ gains have slowed significantly since the first quarter of 2024 as the Nikkei 225 index slipped below record highs, although Goldman Sachs analysts said they saw little need for pessimism about the market.
In the first quarter, the index rose to a record high of 41,087.75 points. But the index has since remained stuck in a range well below 40,000 on concerns about a weak economy, a sluggish economy and weak consumer spending.
Japanese companies also flagged somewhat disappointing earnings outlooks for the coming quarters, despite strong earnings in the March quarter.
While this presents some headwinds in the near term, Goldman Sachs analysts said the recent decline in share prices was likely to be offset by optimism about a possible upward revision to earnings forecasts.
“Investors familiar with the Japanese equity market are well aware that initial forecasts from Japanese corporations tend to err on the conservative side,” Goldman Sachs analysts wrote in a note.
They said the negative price reaction to conservative forecasts likely came from new investors in Japanese markets last year. The strength of Japanese stocks has attracted many foreign investors to the market.
Goldman Sachs analysts also expressed optimism about changes to corporate governance structures made during the quarterly results.
They said the “significant increase” in share repurchase announcements was particularly noteworthy and of value to investors.