• Home
  • Equities
  • Fixed Income
  • Alternative Investments
  • Multi-Asset
  • Passive
  • Thematic
  • Events
  • Market Intelligence
  • Investment Week
  • Newsletters
  • Follow us
    • RSS
    • Twitter
    • LinkedIn
    • Newsletters
  • Events
    • Upcoming events
      event logo
      Milan Forum 2019 (March)

      InvestmentEurope's 9th annual Milan Forum 2019 will take place on 8th March at the Four Seasons Hotel, Milan.

      • Date: 08 Mar 2019
      • Four Seasons Hotel, Milan
      event logo
      Nordic Summit Stockholm 2019

      InvestmentEurope's Nordic Summit returns to Stockholm for the 5th year in 2019.

      • Date: 12 Mar 2019
      • Grand Hotel, Stockholm
      event logo
      Frabelux Forum 2019

      Now in its 2nd year InvestmentEurope's Frabelux Forum will take place on 20th March at the Ritz Hotel, Paris.

      • Date: 20 Mar 2019
      • The Ritz Hotel, Paris
      event logo
      Women in Investment Awards Italy

      InvestmentEurope's Women in Investment Italy will honour the inspiring achievements of women across all parts of the investment industry in Italy

      • Date: 02 Oct 2019
      • Melia Milano Via Masaccio 19 Milan, Milan
      View all events
      Follow our events

      Sign up to receive email alerts about our events

      Sign up

  • Market Intelligence
  • Investment Week
Investment Europe
Investment Europe

Sponsored by

Sharing Alpha
  • Home
  • Equities
  • Fixed Income
  • Alternative Investments
  • Multi-Asset
  • Passive
  • Thematic
  • Equities

Japan pleases investors with high returns and low correlations

  • Tweet  
  • Facebook  
  • LinkedIn  
  • Google plus  
  • Send to  

Japanese equities have not offered investors great joy over time - indeed the Topix index's flat performance this year may cause some celebration compared to the longer term - but fund managers there received at least three pleasant surprises since January.

Japanese equities have not offered investors great joy over time – indeed the Topix index’s flat performance this year may cause some celebration compared to the longer term – but fund managers there received at least three pleasant surprises since January.

The most recent was a 13% rise in the Topix in just four weeks, ending on 4 July. This was without doubt pleasing for passive investors as well as active managers, even if the index since gave back 2.5% from its July peak.

Related articles

  • SuMi TRUST’s Masashi Oda calls the Japanese election outcome
  • Focus on Asia – Japan, Land of the Rising Equities?
  • Focus on Asia – Japan, Land of the Rising Equities?
  • SuMi Trust launches Japanese equities funds

A second surprise was the larger 19.7% leap in the first quarter, before the Topix hit its 2012 peak so far, on 27 March.

One surprise – particularly welcome for Japanese stockpickers yet less commented on – came in February.

Around the time investors in some other developed world markets were struggling with equities moving in lock-step, but in Japan internal correlation of shares hit a 10-year low.

Correlations in Japan have since reverted to nearer their longer-term average.

Melissa Brown, senior director, applied research at analytical software provider Axioma, noted: “In February the 20-day correlation hit a 10-year low, and the 60-day [correlation] was close. While correlations have risen since that bottom, they have only reached average levels, which suggests markets do not seem to be driven by one unifying theme, which should be good news.”

Towards the end of July, Japanese stockpicking managers at Sumitomo Mitsui Trust Group commented that two factors stemming from uncertainty in the global economy seemed to have contributed to the low intra-stock correlation.

“The first is that the market is now focusing more on financial stability of companies than book value.

“In the past, some investors regarded PBR falling below 1 as in investment opportunity, however this is no longer the case, PBR for many stocks currently remains below 1.”

The Japan analysts also noted export-oriented stocks were being sold, while companies relying on their domestic market, and nascent internet-related companies, were “relatively strong”.

“The importance of the stock picking is now more evident than ever,” they said.

Sumitomo downgraded its 2012 earnings forecasts, “mainly driven by revisions in the manufacturing sector. Following research on the global electronics supply chain, their forecasts for the electronic appliances sector were widely cut back due to a bleak PC market outlook.

“Tightening of margin expectations in materials related companies, for which general-purpose items account for a large portion, also contributed to the decline.

Masashi Oda, Sumitomo’s chief investment officer, said: “The Japanese equity market still offers attractive investment opportunities and we strongly believe that current share prices do not reflect the healthy fundamental position that most companies enjoy.”

The market consensus on earnings forecasts continues to be revised downwards, he said, however the estimated PER gap between the TOPIX and the S&P 500 is still negative.

But Oda cautioned: “Corporate earnings may lose their momentum especially in the electronic appliances sector as our analysts anticipate that demand for technology products may miss the market’s expectations.

“Against this background, we have focused our efforts towards picking up companies linked to domestic demand, which are expected to post a higher earnings growth; whilst we remain cautious on technology related stocks.”

Oda suggested some companies are focusing their efforts ever more on their shareholders.

He said the recent spate of cross-border M&A initiated by Japanese companies “shows a shift towards taking shareholder opinion seriously and as a result, many are working on issues such as improving ROE and efficient cash utilisation”.

  • Tweet  
  • Facebook  
  • LinkedIn  
  • Google plus  
  • Send to  
  • Topics
  • Equities
  • Axioma
  • Equities
  • Japan

More From News

Investment Europe launches Women In Investment Awards Italy

  • Thematic
  • 18 February 2019
Gamma Capital Markets hires three financial advisers in Italy

  • Multi-asset
  • 18 February 2019
Rathbones makes changes to Luxembourg range ahead of Brexit

  • Benelux
  • 18 February 2019
Universal Investment appoints new CEO

  • Germany
  • 18 February 2019
Dolfin acquires Falcon's UK subsidiary business

  • UK
  • 18 February 2019
Back to Top

Most read

Swiss bank CEO steps down
UBS overhauls bonuses for 10,000 staff
Credit Suisse announces changes to board of directors
Lombard Odier names managing partner
BNP Paribas hires three senior quantitative analysts
  • Contact Us
  • Marketing solutions
  • About Incisive Media
  • Terms and conditions
  • Privacy and Cookie policy
  • RSS
  • Twitter
  • LinkedIn
  • Newsletters

© Open Door Media Publishing Ltd, New London House, 172 Drury Lane, London WC2B 5QR, registered in England and Wales with company registration number 08584522