One of the biggest things to keep an eye on as far as global cash flows and investor confidence are concerned is cash inflows and outflows. Make no mistake about it, global finance and stock analysts may talk a good game regarding market ‘fundamentals’ and ‘market risks.’ Unfortunately, a lot of this talk is garbed in ‘financese’ and can be quite hard to decipher. If you want a clearer signal as to whether you should jump into a market or stay out, the good news is that you only need to look at cash inflows compared to investment outflows. This simple comparison says volumes about the global investment communities confidence level regarding a particular stock exchange or government economic policy. This is precisely the kind of confidence vote global investors gave Japan according to recent figures and things aren’t looking very bright for Japanese Prime Minister Shinzo Abe’s bold experiment in lifting Japan out of its decades-long economic slumber.
Just how bad are 2014’s investment inflows into Japan compared to the previous year? Very bad. We’re talking 94% bad. Ouch! It looks like despite all the ‘polite’ admiration of global analysts and investment houses regarding Japan’s bold financial gambits at fixing its long term economic health, very few global investors trust Abenomics to pull through. Again, judge them based on what they actually do-or fail to do-instead of their public pronouncements. This 94% decrease in investment inflows is definitely nothing short of a lack of global confidence.
This case of global financial cold feet shouldn’t be a surprise. After all, Japan has been flat on its back economically speaking since the heady days of the 80s. There were several ‘false dawns’ in the past. The scenario seems played out: a new Japanese government comes into power promising to stir the economy back to life, investors get excited, the Japanese yen moves in the right direction, the economy shows sign of coming back to life-and then it goes back into hibernation. One shouldn’t really blame global investors to be a bit gun shy this time around.
With over 20 years’ experience in the heart of the investment industry, Ben Myers has become one of the most respected commentators in the financial world. Having worked for global institutions such as HSBC and Bank of Ireland, Ben ran his own successful investment company in the UK before becoming chief analyst at ECMarkets and now YesOption. Ben remains a keen forex and binary options trader and is a regular featured analyst for a number of online news portals including bbc.com, investing.com, and was responsible for YesOption winning the Best Technical Analysis Award 2014 from DailyForex.com.