Is there a new dawn for investors in Japanese Equities? New whitepaper from CAMRADATA

CAMRADATA has published a new whitepaper entitled, Investment Opportunities in an Ageing Economy, which looks at how the Japanese market is evolving and becoming more attractive to investors.

The paper includes expert insight from guests who attended a recent roundtable on Japanese Equities, hosted by CAMRADATA in partnership with MRJ Investment Advisory. Guests included, Fidelity International, M&G Investment, SPARX, Allfunds, Quilter Cheviot, Redington, RM Caldecott & Partners LLP and Stonehage Fleming.

The whitepaper considers some common beliefs and misconceptions about the Japanese economy and stock market including:

  • Japan is an ageing economy in secular decline
  • Japanese companies are known for their inefficiencies, lag behind their global peers in terms of governance and are not run in the interests of minority investors
  • Japan is a ‘value’ market
  • Japan has had its turn and now China is now the dominant force in Asia.

Sean Thompson, Managing Director, CAMRADATA said, “The Japanese economy and stock market attract investor attention, but also a degree of cynicism, with waves of enthusiasm frequently being dashed by disappointing returns. However, it’s easy to forget that Japan remains the third largest global economy and stock market.

“Our panellists discussed common beliefs about Japan, but also how monetary stimulus, fiscal expansion and structural reforms are bringing about change that could be exceptionally positive for future investors.”

Key discussion points were trends in corporate governance in Japan; how investors can seek growth in an ageing economy; overseas growth and the management of Yen volatility; growth opportunities in smaller, domestically orientated companies, and what selectors look for in their managers.

Key takeaway points were:

  • Japanese companies are changing radically, but the economy lacks growth: the problems of a declining population and ageing demographics is a barrier.
  • The panel considered whether Japanese companies’ relationships with the workforce could be an impediment to capital allocation, and why structural reforms are so important.
  • Japan has global leaders in precision manufacturing and robotics on the industrial side and on consumer goods brands that appeal strongly to the rising middle classes of emerging economies, for instance, China, India and Indonesia.
  • For a global investor, investing in a Japanese equity portfolio of global businesses on an unhedged basis delivers a natural hedge thereby calming currency volatility.
  • There was panel consensus from the selectors, that, though it had not always been the case, leaving a Japan equity portfolio unhedged often makes sense in the portfolio context.
  • There are investment opportunities in smaller, domestically orientated companies and a substantial range of Japanese small and mid-cap stocks from which to choose.
  • There is a myriad of investment opportunities in Japanese funds, from all-cap, large or small-cap, value, growth and even income
  • ESG labelled products are in demand, as governance is such an important dynamic in Japan. The Japanese market is prone to rapid style rotation and accordingly, it is sensible to have all bases covered in the portfolio context.
  • The rise of passive investment globally was a concern raised, but actively managed portfolios remained the ‘go to’ for the panellists.

Sean Thompson, Managing Director, CAMRADATA adds, “There is a new dawn for investors in Japan, but this comes with a note of caution for investors who will need patience to understand this will take time. Our whitepaper includes a wide array of views on the market, but the key point of consensus was the change in governance in Japan and the opportunities this brings. While analytical scepticism remains essential, the green shoots of change make the Japanese market well worth monitoring for opportunities and return in a balanced portfolio.”

Along with highlights of the roundtable discussion, the whitepaper features three articles from the sponsors that offer additional insight. The article topics are:

  • Fidelity International: ‘Seeking opportunities in overlooked growth companies’
  • M&G Investments: ‘Balance sheet reform – The catalyst for a generational release of value’
  • Sparx Group: ‘Investing in stable Japanese companies and minimising currency effects’

To download the ‘Investment Opportunities in an Ageing Economy’ white paper click ‘here

Media enquiries:

Kathryn Hughes, Kayak PR

Tel: 07801 823 839

Email: Kathryn@kayakpr.co.uk

About CAMRADATA

We provide institutional investors, including pension funds, insurance companies and consultants, with data and analysis to assess research and report on their investments. We are committed to fostering and nurturing strong, productive relationships across the institutional investment sector and are continually innovating new solutions to meet the industry’s complex needs.

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