Japan rally may not be all it seems

MARCH was an interesting month in global equity markets. This was assisted by a combination of events such as:

• Optimism in the world’s trouble spots like Brazil and Japan

• Bond markets achieving some stability over the time

• The resignation of German Finance Minister, Lafontaine was regarded as important. He was generally decried by markets and not highly regarded

• The OPEC agreement to cut production saw a bounce in oil prices and pushed up the prices of energy stocks — markets performed very strongly in the month.

Aside from these factors, another very important issue was one referred to some months ago by Max Walsh, the editor in chief of The Bulletin magazine.

Mr Walsh said the Federal Reserve chairman Alan Greenspan, was creating an unrealistic expectation that by utilising interest rates in the domestic US market, he could insulate Wall Street from falls in any of the world markets.

The Fed has conveyed the view that it is looking to keep the world economy on an even keel.

Interestingly, the strongest performing markets in March were those that had been the worst performing a few months earlier.

Brazil’s Bovespa index rallied 20 per cent for the month. Japan, Korea, Hong Kong and Mexico were the other good performers.

Despite the good performance from Japan for the month of March, it must be remembered that its market is notorious for being manipulated by the authorities prior to the end of their fiscal year on March 31. It would seem this year was probably no different.

So before making the decision that the rally in Japan is going to be long lived, wait and have another look at it in a few weeks.

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