Japan Strategy: Factor strategy for the tech rally

研报英文原文证据摘录

Japan Strategy: Factor strategy for the tech rally

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25 Jun 2026 08:48:53 ET │ 18 pages

Japan Strategy

Factor strategy for the tech rally

CITI'S TAKE

Ryota Sakagami AC

Japanese equities are continuing their tech-led rally in 2026 despite the +81-3-6776-4653

March correction. Given the sustainability of earnings growth and current ryota.sakagami@citi.com

valuations, we think AI and semi names are likely to remain the market's key

driver. Financials, materials, and capital goods are also firm, confirming that Keishi Ueda

the rally is broadening. We maintain our view that the bull market will run +81-3-6776-5110

into year-end, and we consider our factor strategy on that basis. keishi.ueda@citi.com

Even outside tech, high momentum and high growth still lead — Factor trends so

far in 2026 show return momentum generally working, with the 3-, 6- and 12-month

momentum factors particularly strong. Value factors are broadly weak, while

forecast earnings-growth and earnings-revision factors have generally delivered

positive returns, and high beta and high volatility are also highly effective. While

these moves may appear to be largely a function of the tech rally, even if we use a

universe that excludes the AI and semiconductor sectors, the relative strength of

each factor is almost the same as for TOPIX as a whole. In short, this is evidence of a

broad-based rally driven by high-growth and momentum that is not confined to

tech. We think momentum’s outperformance since c2023 will not easily reverse.

But value is working with low-beta defensives — With Japanese equities on an up

trend YTD, it is no surprise that high beta and high volatility are highly effective.

However, since March the beta effect has strengthened relative to the index,