Earlier this month, Odey Asset Management became the latest UK investment organisation to walk away from Japan, with the closure of its Japan hedge fund.
This news coincided with published comments by the head of Tokyo’s stock exchange, Atsushi Saito. He warned that Japan might have to sell its assets cheaply to emerging economies such as China and India unless Japanese corporations made major changes to their corporate governance regimes, and helped to address Japan’s growing burden of excessive public debt.
Some might regard such downbeat developments as reasons why savvy investors would want to steer well clear of Japanese equities. However, some investors are going against the grain.
Among them is HFM Columbus’s investment director Rob Pemberton, who before joining the wealth management company in 2006 spent some 20 years as a City fund manager. He initially specialised in Japanese equities before becoming head of global equities for Friends Ivory & Sime, now a part of F&C.
Pemberton, who favours the SG Japan Core Alpha and Schroder Tokyo funds, says he is not “rampantly bullish” on any one equity market.
“But I see Japan as being better placed than most to weather the current storms because its domestic economy is a completely different part of the cycle to those of the UK, US and Europe.
“I would agree that Japan remains a slow-growth economy, with many structural issues, but consider these to be very well known and discounted in market prices and that, slowly, issues of cross-share holdings and low dividend payout are being addressed.
“Valuation measurements such as the price-earnings ratio are at their lowest level for 30 years, while the dividend yield on the equity market is greater than the yield on government bonds, normally a bullish sign for equities.
“Companies have been big beneficiaries of Pan-Asian growth and continue to post double digit earnings, the property market has bottomed and the banks are so ultra-cautious after their flirtation with bankruptcy in the 1990s that sub-prime exposure appears minimal.”
Pemberton, whose company specialises in the higher net worth end of the market, says Japan still has problems, which include a “shambolic” political system.
Also, it is shackled by a corporate environment that, though changing, is still dominated by “a ‘stakeholder’ mentality. This means the interests of a company’s business partners, employees and customers are considered as important as providing shareholder returns”.IFAonline
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