Japanese stocks could rise 30% off governance

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Research by Standard Life Investments suggests that Japanese stocks could rise 15%-30% simply as a result of improvements in corporate governance.

The view is put forward in the manager’s latest Global Perspectives report.

Govinda Finn, senior Japan analyst and Chris Faulkner-MacDonagh, markets strategist, have made the connection to developments stemming from Japanese prime minister Shinzo Abe’s administration, including a push to encourage growth and investments by Japanese companies.

Finn said: “Many global investors have moved heavy or overweight in Japanese equity markets since the Abe government gained power. Yet Japan faces a growth conundrum. With a declining population and high levels of economic development, the prospect of future growth led by capital accumulation is low.”

“To ensure that global investment in Japan becomes a longer term phenomenon, rather than a short term tactical trade, efforts to improve the capital efficiency of Japanese companies, and raise the return on equity for shareholders, become ever more important.

“Key engagement and governance policies for shareholders and institutional investors to monitor for progress over the coming months are: increasing board independence; expanding investor relations efforts; M&A activity; return on equity strategies; shareholder voting practices; restructuring of business operations; plus environmental and social policies.

“There is hope that a transition to a more market based engagement approach will encourage businesses in Japan to make better investment decisions and boost shareholder value. This approach, when combined with other initiatives in the nation’s revitalisation plan such as trade liberalisation and labour market reform, may unlock further productivity growth.”

To view the report click here: http://pdf.standardlifeinvestments.com/exported/pdf/email_links/CO_GS_Perspective_M06_15.pdf


Jonathan Boyd
Editorial Director of Open Door Media Publishing Ltd, and Editor of InvestmentEurope. Jonathan has over two decades of media experience in Japan, Australia, Canada and the UK. Over the past 17 years he has been based in London writing about funds and investments. From editing the newsletter of the Swedish Chamber of Commerce in Japan in the 1990s he now focuses on Nordic markets for InvestmentEurope. Jonathan was awarded Editor of the Year at the Professional Publishers Association (PPA) Independent Publisher Awards 2017. Shortlisted for the same in 2016, he was also shortlisted in 2017 and 2015 for the broader PPA Awards category Editor of the Year (Business Media).

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