Shares of SoftBank Group, a Japanese investment giant, faced some selling from its 52-week high level of 18,745 yen touched last week, following multibagger returns of over 100% in the last one year. The fall in SoftBank Group‘s shares coincides with the more hawkish tone from the Bank of Japan (BOJ).
The stock, driven by strong earnings and optimism around its AI and fintech bets, is facing a retracement as the macro environment turns unsuitable.
Hawkish Bank of Japan
The BOJ kept its interest rate steady at its policy meeting that ended on Friday, but two board members voted against the decision, raising bets that the central bank could raise rates by the end of this year. Meanwhile, the BOJ also signalled plans to unwind ETF and REIT holdings.
As a result, Japanese government bonds (JGBs) extended declines on Monday, September 22, with the two- and five-year yields hitting 17-year highs, as per a Reuters report.
SoftBank Group shares: Should you buy amid hawkish BOJ?
According to analysts, the possibility of monetary tightening by the Bank of Japan could pose headwinds for technology and investment-heavy groups like SoftBank.
With core inflation still above target at 2.7% in August, monetary tightening risks a stronger yen and reduced liquidity, explained Harshal Dasani, Business Head at INVAsset PMS. This doesn’t bode well for SoftBank, which acts as a holding company, investing in and managing a portfolio of technology-focused companies across various sectors like AI, robotics, IoT, and clean energy, he said.
Higher rates increase the cost of debt and reduce valuations of long-duration, growth assets, which have been an essential part of SoftBank’s Vision Fund portfolio, said Ross Maxwell, Global Strategy Lead at VT Markets. “A stronger yen could also hurt overseas earnings when converted back to yen,” he added.
However, SoftBank remains a central player in global AI and tech investment. In Q1 FY2025, SoftBank’s profit came in at 421.8 billion yen ($2.9 billion), as the company rebounded from a loss a year earlier amid a craze for artificial intelligence, which benefited its investments. Quarterly sales at Tokyo-based SoftBank Group, which invests heavily in AI companies like Nvidia and OpenAI, rose 7 per cent to 1.8 trillion yen ($ 12 billion), the company said Thursday, as per an AP report.
Importantly, the discount to its net asset value has narrowed, reflecting improving investor confidence, though valuations remain elevated, opined Dasani. Against this backdrop, Dasani said that while SoftBank’s earnings momentum and AI exposure make it attractive, the narrow gap to its highs and tighter monetary conditions suggest a “buy with caution” stance, with better entry points likely ahead.
Meanwhile, Maxwell said that its recent restructuring of the Vision Fund aims to sharpen its focus on artificial intelligence and foundational technologies, and substantial cash reserves, which provide flexibility and resilience, offer an attractive entry point for long-term investors bullish on AI.
However, he also flagged valuation risks.
“Still, downside risks remain. SoftBank’s valuation is already high, and further BoJ tightening could trigger more downside, especially if global tech valuations also pull back,” he said.
As a result, he told more cautious investors to wait for greater clarity on BoJ policy, currency movements, and SoftBank’s portfolio performance.
SoftBank stock: Tech view
Tech charts also signal some sideways move in the near term, even as the long-term outlook remains bullish.
“SoftBank shares have delivered an extended rally of over 220% from low to high in just under 24 weeks, clearly signalling an overheated and stretched move that has come too far, too soon. Such a sharp rally usually invites consolidation, and the weekly 10-day and 20-day EMAs are likely to act as magnets, capping further immediate upside. We expect the stock to move sideways in the near term, allowing the moving averages to catch up and cool off momentum. Once this healthy consolidation plays out, the broader bullish structure suggests the rally could extend towards 19,500 levels,” opined Anshul Jain, Head of Research at Lakshmishree
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
