This broad range of reforms has vastly improved the country’s economy, particularly in the areas of sentiment, domestic demand, labour and inflation. As the Japanese equities market remains inefficient, value managers benefit from market discrepancies through a long-term bias towards undervalued stocks. The outlook for this asset class is highly favourable, as Japanese equities are currently attractively priced, on both a relative and absolute basis.
- The Japanese yen has been stabilising and the Bank of Japan is firmly committed to continuing its accommodative policies
- Valuations are not demanding
- Economic indicators are improving, especially in the current context of rising inflation
- Government support remains very strong
- “Abenomics” is a broad range of reforms designed to improve the country’s economy
- Japan is at the heart of a fast-growing Asian region
Investment philosophy and process
The strategy for Japanese equities is a concentrated portfolio of undervalued stocks, based on normalised mid-to-long-term profits. With no sector or size constraints, the portfolio manager invests in the research team’s best value-biased investment ideas, capturing either cyclical catalysts, such as production and inventory cycles, or one-off catalysts, such as restructuring, mergers & acquisitions, and share buybacks. Because of its bottom-up selection process, the portfolio’s market capitalisation or sector bias may vary.