(Bloomberg) — A share-price surge in Japan’s trading houses triggered by Warren Buffett’s $6 billion investment is already fading, due to a lack of fresh catalysts and a downturn in commodity markets.

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Shares of two of the five “sogo shosha” — as the commodity-centric Japanese conglomerates are called — are now trading at or below levels before Buffett’s Berkshire Hathaway Inc. announced its stake purchase. The August announcement, among the largest-ever investments by Buffett in Japan, not only sparked a rally in stocks, but also boosted overall investor interest in the trading companies.

The failure of share prices to sustain the higher levels despite Buffett’s vote of confidence highlights the challenges faced by the shosha as the coronavirus pandemic erodes demand for commodities. It also speaks to the challenges for a Japanese equity market heavily weighted toward so-called value shares, with the benchmark Topix Index on track to lag the MSCI AC World ex-Japan Index for a fifth straight year in 2020.



chart, line chart: Japan's shosha are losing much of their Buffett-led gains


© Bloomberg
Japan’s shosha are losing much of their Buffett-led gains

Berkshire announced on the last day of August that it had bought stakes of about 5% in each of Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui & Co. and Sumitomo Corp. That saw shares of all five firms jumping, with Sumitomo gaining more than 9% on the day.

As of Tuesday, Itochu and Sumitomo have given up all or most of their gains since the announcement. Only Mitsubishi remains substantially higher — with a 7.8% gain since, versus a 2.6% advance in the Topix index in that period.

“The Buffett purchase gave investors a chance to review the shosha stock prices, but since then, they’ve been sold as sentiment wasn’t as strong as hoped for,” said Yoshihiro Okumura, a general manager at Chibagin Asset Management.

By Hari Kishan and Rahul Karunakar

BENGALURU (Reuters) – The recent surge in the U.S. dollar will last less than three months, according to a majority of foreign exchange strategists polled by Reuters who said the greenback would have a roller coaster ride in the run-up to the U.S. presidential election.

In September, the dollar rose more than 2% – its best monthly performance this year. But the greenback is still down more than 3% in 2020, a loss which was not expected to be recouped over the coming year, according to the Reuters poll of around 80 strategists taken between Sept. 28 and Oct. 5.

While last week’s ill-tempered debate between President Donald Trump and Democratic challenger Joe Biden reinforced concerns the outcome of the Nov. 3 presidential election could be questioned and boosted the greenback, hopes for U.S. stimulus have had markets in the mood for riskier bets.

The expected pull and push in the currency market in the lead up to the election was underscored by the wide range of forecasts in the one-month-ahead predictions compared to the previous month.

While Trump’s positive test for COVID-19 and data on U.S. currency futures positions point to upside potential in the dollar’s recovery, nearly three-quarters of analysts, 54 of 75, in response to an additional question said the greenback’s recent surge would last less than three months.

That included 13 respondents who said the dollar’s run-up was already over, while the remaining 21 predicted it to run for over three months.

“The outlook for the next month or so is messy to be honest, because of the U.S. election… but the dollar will benefit from the ongoing political uncertainty in the next few weeks,” said Kit Juckes, head of FX strategy, at Societe Generale.

EUR/USD and U.S. Treasuries/German Bund