LONDON: Recovery is no flash in Japan, say J.P. Morgan investment trust managers: Changes wrought by Abenomics are "long-term and structural"
Jul 08, 2013
The recent sell-off in Japan has only served to underline the attractiveness of the market fundamentals, according to the managers of J.P. Morgan Asset Management’s two Japan investment trusts, JPMorgan Japanese IT and JPMorgan Japan Smaller Companies Trust.
"This is not a six-month rally – the changes in Japan are long-term and structural in nature," said fund manager Nicholas Weindling, who works across both portfolios. “Even though there may be volatility in the short term, we think that after many false dawns for the Japanese stock market, things really are different this time."
Weindling says that he and his fellow managers (Shoichi Mizusawa and Naohiro Ozawa co-run the smaller companies portfolio) have never before seen the current level of domestic policy support, not just from the government of Shinzo Abe and his finance minister, but also from the Bank of Japan and from Japanese companies.
"Abe has strong political capital, with better public support at this stage of his leadership than any of the recent incumbents, which should stand the LDP in good stead for the Upper House elections on 21 July," explained Weindling. "He has a strong agenda of fiscal stimulus, aggressive monetary policy and structural reform.
"The Bank of Japan, which has historically been unable to address deflation, is now committed to achieving 2% inflation within two years, and its new policies have taken the market by surprise. Domestic reflation is already happening: retail sales are up, particularly in luxury sectors, and financial services employment and business travel are on the rise."
However, many investors remain sceptical that Japan is changing, in spite of the fact that the country is highly geared to the improving trend in global trade as developed economies finally begin to shake off the hangover of the global financial crisis.
This means there is significant upside potential in a market that remains undervalued, trading at a discount to other major markets on both a price/earnings and price/book basis despite being the only major market where analysts are still upgrading earnings numbers.
Weindling added: "The gap between perception and reality in Japan is a real source of opportunity for active managers, as the Japanese market is currently polarised between winners and losers more sharply than it has been in the past, and more sharply than is the case in other markets. With half of all Japanese companies covered by only one sell-side analyst or not covered at all, our on-the-ground presence means we should be better placed to take advantage of the emerging opportunities than some of our competitors."
Nicholas Weindling and Naohiro Ozawa will be visiting London the week commencing 15 July, during which time they will have some availability for press interviews. If you are interested in meeting them to discuss the current opportunities in Japanese large or small-caps, please contact Sarah Godfrey on the number below as soon as possible.
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Notes to Editors
About J.P. Morgan Asset Management
J.P. Morgan Asset Management is part of JPMorgan Chase & Co. and is a global asset management leader providing world-class investment solutions to clients. With US$1.5 trillion in assets under management (the Asset Management client funds of JPMorgan Chase & Co. as at 31 March 2013) and offices in 41 locations around the world, J.P. Morgan Asset Management offers global coverage with a strong local market presence, and leadership positions in most asset classes.
J.P. Morgan Asset Management is a trading name of J.P. Morgan Asset Management Marketing Limited, which has issued this material in the United Kingdom and which is authorised and regulated by the Financial Services Authority. Registered in England No. 288553. Registered office: 25 Bank Street, Canary Wharf, London E14 5JP.
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