Japanese funds are doing well and fund managers are optimistic on the market, suggests research conducted by Standard & Poor's.
Defensively positioned Japanese funds suffered in the first quarter of 2004, but rallied in the second quarter, while cyclicals appear to have performed well in the first quarter and then underperformed in the second.
Smaller cap funds also outperformed, returning 47.1% over the year, according to S&P statistics.
As a result, fund manager optimism is improving, compared with previous months when fund manager investment briefings suggested Japanese bank debts still posed a threat to profitability of stocks.
Osamu Tokuno, manager of Invesco's Japan Enterprise fun -rated second out of 93 Japanese smaller company funds - has says the current average PER is at a reasonable level while the market has large potential upside on a medium term basis.
Invesco's Japanese Equity Core fund ranked fourth quartile in the S&P Japan mainstream sector in the first quarter yet rebounded in the second.
Invesco's fund largely avoided significant cylical exposure as fund manager Paul Chesson had taken the view the Japanese economy had peaked.
So Henderson Global Fund's Japan fund, invested in cyclicals ranked top quartile in the first quarter but fell in the second quarter.
According to Standard & Poor's, more fund managers are optimistic rather than pessimistic that Japan would continue to outperform other developed markets.
That said, some managers still have concerns over the US and Chinese economies. Hideo Shiosumi, manager of Legg Mason Japan Equity fund (ranked one out of 503 Japan Mainstream funds in the first two quarters)is optimistic however, claiming structural changes in Japan had been comprehensive enough for Japan's economy to withstand a slowdown in the US and China and continue to grow. Shiosumi also predicts a rise in the Japanese stock market despite US and Chinese market conditions.IFAonline
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