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(Bloomberg) -- When the Japanese stock market endured its worst selloff in years earlier this month, foreign investors were selling futures heavily but buying cash equities. To some, that is a good sign that stickier money hasn’t lost confidence in the market.

Foreign investors sold ¥777 billion ($5.28 billion) in Japanese equities, cash and futures combined in the first week of August. Most of that was in futures — the most liquid instrument in the market — with some ¥1.273 trillion sold, the largest amount since October. But foreign investors also turned into net buyers in cash equities the same week, buying almost ¥500 billion of them, the most in four months.

The dynamic likely represents opposing views in the market.

“Those who are reacting to the Bank of Japan’s rate hike and US slowdown worries are mostly selling futures on short-term perspectives,” said Naoki Fujiwara, senior fund manager at Shinkin Asset Management. “Investors who are looking at the valuations and fundamentals of the market are buying, and probably looking at Japan’s inflation in a positive light.”

Data from JPX supports such a view. Selling centered on Nikkei futures — preferred by short-term investors because they are more volatile than the futures of the broader Topix index — amounting to ¥833 billion. That was the most since March 2023, when some investors rushed to sell after the collapse of Silicon Valley Bank and Credit Suisse Group AG sparked fears of a major financial crisis.

In contrast, selling in Topix futures was just short of ¥600 billion, the fifth-largest amount since the SVB collapse.

Market players say many long-only investors would prefer to sell Topix futures should they want to hedge their exposure, given that their portfolios are benchmarked to the Topix. The Nikkei is rarely used as a benchmark because the gauge is a simple price-weighted average and as a result gives disproportionately high weighting to stocks including Fast Retailing Co., Tokyo Electron Ltd. and SoftBank Group Corp.

On the other hand, long-only investors appeared to have taken advantage of the market’s plunge to buy cash equities cheaply. Among them, some were expecting Japan’s Government Pension Investment Fund to step in in order to re-balance its portfolio, said Yoshitaka Suda, cross-asset strategist at Nomura Securities.

The GPIF is currently mandated to keep about 25% of its total assets in stocks. As such, a 20% plunge in the market would have required it to buy trillions of yen in stocks. Data from JPX showed trust banks, which are seen as a proxy for flows from pension funds including the GPIF, only bought ¥421 billion, suggesting the market may have quickly recovered as investors tried to forestall the GPIF.

However, after the market rout this month, foreign investors became net sellers of Japanese stocks for the first time year-to-date, which could be taken as a sign that they have lost faith in the country’s equities. By the first week of August, they had sold ¥1.663 trillion yen of Japanese equities in cash and futures.

Still, the selling has been driven by futures. Year-to-date, investors have sold ¥5.4 trillion of futures while buying ¥3.8 trillion in cash.

That suggests the possibility of short-covering. Suda estimates there still remains about ¥1 trillion in short positions in Nikkei futures.

“That’s considerably lower than the peak but that is a positive factor for the market,” he said.