Thomas Becket, chief investment officer at PSigma Investment Management, is bullish on Japan’s fortunes in the year ahead. “Japan has been the leading light of this year’s drama, but valuations remain reasonable, profit growth is underestimated, and we see evidence of the army of naysayers buckling towards the region and investing,” he explains.
Mark Burgess, chief investment officer at Threadneedle, agrees the outlook is not as negative as some might suggest. “Japan has embarked on a clear and credible path, and ‘Abenomics’ has been transformative. Low interest rates support credit growth and 80 per cent of companies are set to raise base salaries. More challenges lie ahead, but we expect further gains in equities.”
After decades of uncertainty and unpopularity, 2014 could see Japan reclaim a place in investor’s portfolios, providing the government sticks to its strategy and doesn’t allow short-term factors influence its decisions.
As John MacDougall, manager of Baillie Gifford Shin Nippon, observes: “The next few years will produce plenty of opportunities to invest in dynamic and innovative companies in Japan.”
Nyree Stewart is deputy features editor at Investment Adviser
PREDICTIONS: What the experts forecast
Ted Scott, director of global strategy, F&C Investments:
Japan was the best-performing equity market in the first half of 2013 as equities responded to the new economic strategy of the prime minster Abe. The policy of quantitative easing is even more aggressive than the UK and US and has helped weaken the yen and create improved economic growth and company earnings, and even raise the inflation rate slightly. Although there is still much to do, if the government remains committed to the new strategy there is a good chance the economy may break free of the debt-deflation trap that has shackled growth for more than a decade. This should drive a further rally in equities, although Japanese government bonds could fall sharply in such a scenario.
Adrian Lowcock, senior investment manager, Hargreaves Lansdown:
2014 could see further gains for Japanese shares. The Topix index has risen 25 per cent so far in 2013 (to November 31), while company earnings have risen 17 per cent. Japanese shares continue to look good value, with the Topix among the cheapest of the major stockmarkets. In 2014 the introduction of a Nippon ISA should encourage Japanese investors back into the stockmarket.
Mark Burgess, chief investment officer, Threadneedle:
Japan has embarked on a clear and credible path, and ‘Abenomics’ has been transformative. Low interest rates support credit growth, and 80 per cent of companies are set to raise base salaries. More challenges lie ahead, but we expect further gains in equities and are overweight in financials and beneficiaries of policy action.
