Morgan Stanley says Japanese insurance stocks attractive despite deep correction

Investing.com-- Morgan Stanley said that a recent decline in Japanese insurance stocks had stretched too far, and reiterated its view that the sector still remained “Attractive.”

MS noted that insurance stocks had logged steep losses so far in August, amid broader declines in the Japanese stock market. But compared to declines in Japan’s benchmark indexes, such as the TOPIX, insurance stocks had lost much more value, with MS estimating losses between 16.2% and 22.7% in the recent market downturn.

Tokio Marine Holdings, Inc. (TYO:8766), Sompo Holdings Inc (TYO:8630), MS&AD Insurance Group Holdings (TYO:8725), Dai-ichi Life Holdings Inc (TYO:8750) and T&D Holdings, Inc. (TYO:8795) had fallen in that range. 

A drop in stock markets still presented “not insignificant” risks to insurance stocks, MS said, given that they held some exposure to Japanese markets and that claims values were unchanged despite market shifts.

But MS argued that declines in insurance share prices were much more pronounced than that seen in the broader market, and that there was no reason for the disconnect.

The brokerage reiterated its Attractive view on the Japanese insurance industry.

Japaneses shares were walloped by hawkish signals from the Bank of Japan and a broader risk-off sentiment over the past week, which sparked steep declines in the Nikkei 225 and the TOPIX and put both indexes squarely in a bear market from recent highs. 

But local stocks rebounded sharply over the past two sessions, recouping a bulk of recent losses.