Japan Stocks: What To Expect. Blackrock Investment Institute.

1453 WordsApr 20, 20176 Pages
Japan stocks: what to expect BlackRock Investment Institute Members of the BlackRock Investment Institute participated in a Dec. 5 call to discuss the prospects for Japanese equities. The scheduled speakers were xxx. Here is a summary. ¬ Japanese equities are in demand after years of being unloved, but a lot of the gains can be attributed to what’s happened in the U.S. rather than Japan. The extraordinary session of the Diet in Tokyo may give investors a sense of whether lawmakers are willing to embrace investor-friendly reforms championed by Prime Minister Shinzo Abe. ¬ Stock pickers have plenty of shorter-term, tactical reasons to buy including a weaker yen versus the U.S. dollar, the new Bank of Japan policy keeping 10-year note…show more content…
The market is likely to grind higher in the medium term, but an absence of fundamental improvement in corporate earnings quality and investor psychology means the market would remain a tactical trade for the time being. Japanese equities respond well to yen weakness, and this sensitivity has been stronger than usual in the past few years, given the higher-than-normal volatility in the yen and the focus on macroeconomic development. Most investors believe that the U.S. Federal Reserve is expected to raise rates and allow inflation to run hot in the next 12 months, while the European Central Bank and Bank of Japan are likely to stay accommodative in a low-growth environment. The recent OPEC agreement on oil production cuts, and the much hyped fiscal stimulus plan by the U.S. President-elect Donald Trump, further raise the U.S. inflation outlook and fuels the strength in the greenback, and weakens the yen – a goal the Japanese government has long sought to achieve. The U.S. 10-year government bond yield, a proxy of U.S. inflation outlook, has dominated stock price moves in Japan since the BoJ decided to target the 10-year yield of the Japanese government bond at its September meeting, some investors noted. Brokers, banks, shipping and trading companies are the most sensitive to the U.S. 10-year yield – and the best performers during the period. Relatively cheap valuation in Japanese stocks compared to most

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