Weston Nakamura on Asia's Hidden Hand in US Markets

With Korean families selling homes to buy Tesla stock and Japanese retirees moving their massive savings into US assets, is the US the cleanest dirty shirt?

I was reunited with the wonderful

Weston Nakamura

from Across the Spread yesterday on Talking Markets, and as ever, his perspective as “an American looking from the outside” in Japan was invaluable. And even at 6am Japan time, he had some zingers…

South Korea → US

South Korean retail investors have been pouring money into US equities, specifically US single stocks - and even more specifically, Tesla.

Weston wrote more about that here (it is a great read), but overall, he says, “South Koreans [are] massive sellers of their own equity market, and they’re at $100 billion in US equity holdings. That’s 60% higher year over year, and that data is from before the martial law [news].”

“Koreans have been not so bullish on their own equity market and they've been basically looking for opportunity,” Weston says. “Not out of greed, but out of wealth divides and cost of living expenses and just to try to keep up.”

Essentially, they are looking at dysfunctional political systems, bad currencies and thinking, ‘The only way I can salvage a financial future is to own dollar assets.’

Japan → US

A similar flight of capital is happening in Japan, fueled partly by the revamping of NISA accounts to increase the amount of tax-free investing Japanese people can do, and partly because of the yen melting down.

“You basically have Japan households who have more than half of their financial assets in cash,” Weston said. And now they have realized they are extremely long a terribly performing currency, and “so they've been taking their cash and they have been exchanging it for US dollars in order to buy US equities.”

As for which equities, Weston says they have been huge buyers of ETF kinds of funds “that are mostly targeted at the top.” “They're going to buy the sexy US stocks, the tech stocks, that they're familiar with,” he said. “People drive Teslas, they use Amazon, they use Google here and all that. So why not buy those companies?”

Crypto’s Benefiting, Too

Weston points out that Bitcoin breaking above $100,000 coincided with the political turmoil in South Korea, and that both Japanese and South Korean investors are already substantial crypto investors.

“If you're looking at it from perspective of you're fleeing something else, and it doesn't matter what the destination is, then you're going to find refuge in something like Bitcoin or the S&P 500 index fund or whatever, in a price indiscriminate manner,” he said.

Currency Intervention Incoming?

Weston agrees with Jared Dillian that the Trump administration is likely to jawbone the dollar lower, and says broader currency intervention will likely happen.

“Japan has been, in a very non-G7 protocol way, unilaterally smacking US dollars downwards. That's not how you're supposed to do it. You're supposed to sit down with your counterpart at the Treasury Department or the Ministry of Finance and you discuss where you're going to fix the level,” Weston said. “That's the norm, right? So if anything, we're just gonna revert to the norm of how things are done, and you have both sides now explicitly open to this. Japan no longer wants the currency this weak. The United States does not want the dollar this strong You're gonna find harmony in that working together.”

Moar China Stimulus

Weston is skeptical that China’s signaling of more stimulus for 2025 will result in real change in consumption behavior in the Chinese economy. “Just based on the so many times we’ve seen this movie before,” he said. “At this point, you have to actually show that jawboning and stimulus for people to actually believe it this time.”

Weston also said he personally doesn’t invest in Chinese equities, because in China, “it's not about applying Western measures of valuation and things like that. If you want to invest in China, that's a game of understanding policy behavior and policy announcements. So if you want to like go long something in China because of the valuations are low, that's not the metric you should be looking at… You have to look at what the policy outlook is and how that's going to impact shares.”

Weston’s Outlook

On US Equities: Based on the flows from South Korea and Japan to the US, Weston says: “I would think that over the next year, the US equity markets would continue to grind higher. Doesn’t mean I’m bullish on the economy, I’m just talking about green and red tickers.”

On Bonds: “Yes, the US has problems,” Weston said. “However, who is the largest foreign holder and buyer of US Treasuries? That’s the Japanese. The Japanese are in much, much worse fiscal condition than anybody else in the world. So as long as Japan has more political turmoil and worse credit dynamics, you'll get flows into the US. As long as it has worse currency dynamics, you'll get flows into the US dollar. As long as it's worse like debt dynamics, you'll get flows into US Treasuries.”

To watch the full episode, right this way.

Enjoy,

Maggie

Important Disclaimer: It is crucial to remember that this article is for informational purposes only and should not be considered investment advice. Consult with a qualified financial advisor to assess your risk tolerance, investment goals, and overall financial plan.