Japan surprise package for 2010?
Filed under: Investing, Markets
Asia Pacific (notably China) is being talked up but what about one developed market in that region that is not attracting the headlines at present – Japan?
There are those who think Japan might just be the surprise package of 2010.
Andrew Merricks, investment specialist at Skerritt Consultants suggests Japan might be one to watch this year.
"Yes, we know...we must be barmy in tipping the perennial laggard but, with the Yen possibly weakening (thus helping its exporters), and its growing trade links with China and the rest of Asia, the scene could finally be set for a good year from the Japanese stock market.
"This one may come back to haunt us, but let's see in 12 months' time."
"Japan faces being overtaken by China as the second largest economy in the world at some point in 2010 and a sustainable economy recovery is not certain.
"Japan continues to experience severe deflation and it is only likely to be a world economic recovery driving a recovery in Japan in the second half of 2010."
He adds: "Deflation in Japan is a structural problem and it could take a long time to return to an inflationary environment.
As a firm, our view is to remain tactically underweight in Japanese equities for the first quarter of 2010, although we may revise this to a neutral position later in the year should things start to improve."
"We recommend that clients rebalance back to their initial portfolio on a regular basis. Looking at client portfolios at the end of 2009, Japan has lagged behind most other major countries in terms of stockmarket performance and because of this.
"When clients are rebalancing their portfolios most are adding to Japan because they are currently 'underweight'."
Invesco Perpetual Japan fund was the best performing fund in its sector for 2009 returning 52.04% for the year. However this compares to 98.65% from the Schroder Asian Alpha Plus funds, the best performing fund in the Asia Pacific (ex Japan) sector over the same period.
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"This one may come back to haunt us, but let's see in 12 months' time."
Deflation
Martin Bamford, financial planner with Informed Choice, is less inclined to be positive on Japan."Japan faces being overtaken by China as the second largest economy in the world at some point in 2010 and a sustainable economy recovery is not certain.
"Japan continues to experience severe deflation and it is only likely to be a world economic recovery driving a recovery in Japan in the second half of 2010."
He adds: "Deflation in Japan is a structural problem and it could take a long time to return to an inflationary environment.
As a firm, our view is to remain tactically underweight in Japanese equities for the first quarter of 2010, although we may revise this to a neutral position later in the year should things start to improve."
Get the balance right
Jason Whitcombe, chartered financial planner with Evolve Financial Planning believes investors should only look for a modest and tactical rebalancing towards Japan."We recommend that clients rebalance back to their initial portfolio on a regular basis. Looking at client portfolios at the end of 2009, Japan has lagged behind most other major countries in terms of stockmarket performance and because of this.
"When clients are rebalancing their portfolios most are adding to Japan because they are currently 'underweight'."
Invesco Perpetual Japan fund was the best performing fund in its sector for 2009 returning 52.04% for the year. However this compares to 98.65% from the Schroder Asian Alpha Plus funds, the best performing fund in the Asia Pacific (ex Japan) sector over the same period.
According to the latest IMA figures European and Japanese funds were the least attractive sectors in terms of attracting new money for the last quarter of 2009. But perhaps a brave call on Japanese equities might just prove a lucrative one too?
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