Wataru Ogihara, Equity CIO of Nomura Asset Management, explains why Japan offers some unique and compelling investment opportunities, and why this market could be overdue for a re-evaluation in 2021. He highlights the “great rotation” between value and growth stocks, Japan’s appeal to small-cap and ESG focussed investors, the lasting impact of structural reforms, and the implications of China’s rapid recovery.
As widely expected, Yoshihide Suga, former chief cabinet secretary, was voted as Prime Minister on 16 September. Shinzo Abe announced his resignation at the end of August, citing ill-health. Suga stated his top priorities to be managing the pandemic and strengthening the economy. He signalled a continuation of Abenomics growth policies - monetary easing, fiscal spending and structural reforms.
Economies around the world are now steadily reopening from what has been widely described as an “induced economic coma”. Their recoveries are underpinned by assertive monetary easing policies, including central bank balance sheet expansion and credit support, together with fiscal stimulus packages that have been inventive and unprecedented in scale. However, the optimistic and partly liquidity driven equity market narrative met some resistance in June, which brought with it a rise in volatility and a more circumspect tone. Japan’s broad market rebound effectively hit the ceiling in June as the TOPIX ended fractionally lower, losing 0.2% on the month.
The case for investing in Japan has always relied on its many world-leading companies. In times of heightened uncertainty and acute economic stress, we believe quality companies that are adaptive, resilient and innovative will emerge even stronger. This pandemic will test their competitiveness, but those true winners will continue to reign. From a growth portfolio manager’s perspective, our objective is to identify these winners in the Japan equity market that are adapting and strengthening their businesses under challenging conditions.
We are pleased to publish our first dedicated Impact Report, which outlines the progress our Global Sustainable Equity Fund has been making through its investment and engagement with companies that we feel have the greatest total positive impact on society.
While Europe and the USA are suffering massively from the coronavirus crisis, many Asian countries are already further ahead in terms of the outbreak’s progression and their containment measures. We asked our Senior Investment Specialist Min Feng whether the Asian markets can continue to outperform over the next few months.