Investors looking for medium-term returns might find Japanese equities are a good buy again, suggest...
Investors looking for medium-term returns might find Japanese equities are a good buy again, suggests JP Morgan Fleming in its latest review of the Japanese market.
Improved demand for exports, a weakened dollar and recent corrections in the markets mean Japanese stocks, especially those listed on the Topix (technology index) present a buying opportunity now share prices have been readjusted in the wake of September 11, according to Stephen Mitchell, JPMF's Japanese fund manager.
Growth in Japanese exports is largely because of demand in Asia and China, rather than the US where exports are usually favoured, as consumer demand in China as Foreign Direct Investment creates jobs.
And the correction of the Topix back to 1,000 points is a "buying opportunity" says JPMF, as previously popular stocks - Fuji Photo Film, Mitsubishi and Sumitomo - all look good value again and are strong names.
JPMF's key exposure is still likely to stay with small to mid-cap stocks as the fund management firm says good names are available at discount valuations.
But providing the dollar weak and the yen stays at around Y120, the export sector will be able to maintain earnings forecasts and remain competitive, predicts Mitchell, as new more "domestic" names are being added to funds by Japanese fund managers.
"JPMF's many company visits tell us that an increasing proportion of corporate Japan is sorting itself out and is on the front foot again, across a diverse range of companies. he medium term outlook is improving and these "good" companies represent a much bigger proportion of the market than they did back in 1989," says Mitchell.
"Japanese stocks are now at levels where from a bottom-up view we can become aggressive buyers, and in the meantime short covering is not far away.
For Japanese equities on a relative basis to other world markets this a buying opportunity, and also for the trading rally that will come. It may just be that upgrading Japan on a medium term view is now right too," he adds.
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