Japan set for a good summer
Aug 13, 2009
- J.P. Morgan Asset Management says Japan’s summer in the spotlight will have a positive impact on Japanese equities.
London, 13 August 2009, J.P. Morgan Asset Management says Japan’s summer in the spotlight will have a positive impact on Japanese equities.
Following the dip in GDP figures as a result of the global recession in 2008, 2009 is proving to be a better year for Japan, with the summer proving to be a particular highlight. Japan is showing signs of a ‘revival’ in economic activity as equities outperform other developed countries and upside risk now seems to be greater than downside risk in the Japanese equity market.
The summer focus is as a result of the release of economic figures, better than expected Q2 2009 corporate earnings and the forthcoming general election.
When Japan GDP figures are announced next week they are expected to indicate a move back to positive GDP growth before the US and UK. Projected forecasts for April to June show GDP growth in Japan to be +2.35% SAAR and it is expected the cyclical recovery of Japan is poised to be sustained.
The summer has also revealed that Q2 2009 corporate earnings results have been better than consensus and earnings forecasts have been revised up.
Erina Jindai, Japan Client Portfolio Manager at J.P. Morgan Asset Management said, “Positive corporate earnings have been driven mainly by a steep recovery in exports, which dragged down Japanese GDP sharply in 2008 when exports slowed dramatically.”
The forthcoming Japanese political elections may also have a positive impact on Japanese equities, particularly amongst foreign investors, particularly if the DPJ gains power.
Erina Jindai said, “After Junichiro Koizumi led the LDP to a landslide victory in 2005 on the back of promises of reform, the Japanese equity market significantly outperformed for the following months. While history never completely repeats itself there is a possibility that a landslide victory for the DPJ, combined with visible signs of recovery in fundamentals, may trigger a shift in market sentiment, especially among foreign investors who are significantly underweight Japanese equities. Foreign investors tend to want a story to invest in Japan and this story is to do with change, the possible shift in Japan’s ruling party. At present we can see foreign investors have started moving slowly back into Japanese equities, but the elections may become a catalyst for investment.”
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