The UK-based investment fund AlgoRates.com, which recorded high earnings this year utilizing the industry's most sophisticated algorithmic trading software, has announced that the fund will soon take major positions in the Nikkei 225, Japan's main equity benchmark.
The Nikkei started the year near 10,600, hitting a peak of 15,942 in May. Since then, it has plunged about 8%, making it the most volatile indices among the developed markets.
AlgoRates.com's strategy is partially based on HFT, or high-frequency trading, a technique most profitable in markets with high volatility. Its state-of-the-art robot trading software can make split-second decisions to initiate orders based on the analysis of millions of bits of data before human traders are capable of processing the information they observe.
"We participate in several markets,” says Patrick Lane, a Senior Analyst for AlgoRates.com, “and our algorithms have proven their ability to predict the direction of the market. In many cases, the robots work much faster than humans acting alone, so we think that whichever way the Japanese market trends during a particular day, our system will prove effective for our clients.”
Indeed, during the past year, AlgoRates.com's high-tech algorithmic programs have proven consistently accurate in predicting both short and long-term market trends. Last month, the Dallas Morning News reported that, “having predicted [the decline in the Australian dollar] in early May, AlgoRates.com sold the Australian currency and recorded significant profits for their customers." (source: http://www.mediawebsite.net/danews/story/?catSetID=7007&catID=290812&nrid=221314131&page=1&lang=en)
The fund also made major gains on gold's decline earlier this year. The International Business Times noted that in January, AlgoRates.com, “sold the majority of their gold holdings prior to this year's downturn.” (source: http://markets.ibtimes.com/ibtimes/news/read?GUID=24799410)
Since the beginning of the year, AlgoRates.com has recorded an impressive 12 percent earnings in the German DAX 30 and almost 15 percent in the US Dow Jones, despite heavy losses suffered by both indices in August.
“To be clear,” says Lane, “not every forecast made by our algorithmic software is acted upon. Even when it suggests a certain trend, we must validate its forecast, according to economic fundamentals.”
When pressed as to whether AlgoRates.com is bullish on the Japanese benchmark, Lane appeared fairly optimistic for the short term. “There are indications that the Nikkei 225 has just started its advance, and therefore, now poses a good buying opportunity.”
The Nikkei includes Japan's most prominent names and industrial giants. Among them are Toyota, Honda, Nissan, and Sony. These companies not only capitalize on Japan’s consumer, but also export goods abroad.
Lane pointed out that last year, the Japanese economy was in recession. The focal event that ignited the Nikkei took place in late 2012, when Japanese Prime Minister Shinzo Abe came to power following early elections. He took office with a plan to revive the ailing economy and a part of that plan was a policy to lower the Japanese currency.
The Japanese central bank set this policy in motion last March when it started an aggressive quantitative easing (QE) program, printing money and buying Japanese bonds. One of the results of this program is higher inflation, and a weaker yen. The yen traded just above 80 yen per US dollar last year, and now it is almost 100. In May this year, it hit a low of just under 104 per U.S. Dollar.
“The Nikkei consists of major exporters who benefit from a lower Japanese currency,” says Lane, “which means these companies earn more in yen from exports.” This was one of the causes which ignited the Nikkei to hit a near five-year high. Although this peak was followed by a correction, the QE program in Japan is widely expected to weaken the yen further, benefiting the major Japanese exporters listed in the Nikkei. According to economists at AlgoRates.com, these market fundamentals lead analysts to conclude that the higher yen earnings by Japan's major exporters will inevitably continue to bolster the Nikkei in the short term.
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Original Source: AlgoRates.com Sets Sight on Japanese Market