If one listens to Jonathan Garner of Morgan Stanley, Japanese stocks are now the top pick worldwide, surpassing even the US stocks which are already high post the presidential election. Many analysts concur with Garner's view, like him, they sense greater opportunity in Japanese markets. He is a strategist specializing in market equity.
Optimistic on Japan
There are reasons to be optimistic on Japan. The Yen showed weakness against the American dollar, with the latter going up highest in 13 years. In contrast, the Yen is down by almost eight percent compared to the dollar in November, scraping at 113.89 during the third week of November. This value represents the lowest level of the Japanese currency against the US dollar from March. The Japanese stock markets perform better as well. The Standard & Poor 500 went approximately three percent since American elections on November 8. The Topic index of Japan is globally the best performer with gains of approximately six percent.
The shock victory of Donald Trump in the US Presidential election has pushed investors to have a re-look at the kinds of investments and stocks held by them. The important American Indexes have pushed up to all-time highs when the financials extended their gains. It may be noted that previously beat down sectors like industrials also went north.
Funds concentrated on emerging markets witnessed outflows for the fourth consecutive week during the third week of November. Stock funds in Japan, in contrast, began to witness inflows post US election. Koesterich said that in an environment of the appreciating dollar, the same environment will be much more favorable for the developed markets and headwinds will buffet the emerging markets- both in stock markets and in bond markets as well.
Koesterich also said that there are a few places in the emerging markets, where stocks have slid excessively and opportunities can be found in the individual Chinese stocks, especially for a few stocks which gets traded in Hong Kong.
Other than Morgan Stanley, a number of other equity strategists are bullish on Japan as well. Japanese stocks are being recommended by BlackRock as well. Their bullish sentiments are due to favorable stimulus conditions from both central bank policy and government spending. Other positive factor contributors include corporate governance. According to Russ Koesterich, Japan continues to be the cheapest among all developed markets. The weakness of the Yen has created another catalyst.