Attractive returns and breadth of opportunities are among the many reasons why the United States has long held a leading position for investors. However, according to one strategist, the different market has much better valuations at the moment. “The U.S. is relatively expensive. In terms of countries, Japan is looking to offer the best combination of earnings growth, cheap valuations and policy support,” Tom Stephenson, chief investment officer at Fidelity International, told CNBC Pro. He said: “Japanese stocks are trading at about 15 times the expected profits for this year and 14 times the expected profits after two years.” “There has been some increase in this multiple during the recent rally in Japanese stocks, but they remain relatively cheap compared to the US which trades at around 20 times earnings.” Japan’s Nikkei 225 is up more than 18% year to date, while the US S&P 500 is up nearly 11%. Against this backdrop, Daniel Hurley, portfolio specialist for emerging markets and Japan equity strategist at T. Rowe Price (TRP), views the country favorably. “With a continuing supportive backdrop for Japan, including currency dynamics, global growth and corporate governance reform, the outlook for Japanese stocks is positive and valuations are positive. [are] “Japan appears to be on track for its strongest economic growth since the early 1990s. The country’s inflation levels have improved after years of deflationary pressures, while earnings revisions are positive,” Stephenson told CNBC Pro. of Japanese stocks follow the restructuring rules unveiled by the Tokyo Stock Exchange Group earlier this year. Among the latest measures was directing companies to “comply or explain” if they trade below a price-to-book ratio of one – a measure that is an indicator of whether a company is using its capital efficiently, and the exchange has also warned that companies that do not comply It could face the possibility of delisting as soon as 2026. Dollar – TRP’s Hurley and Fidelity’s Stevenson both believe there are some investment gems to be found, and Hurley notes that issuers in particular will benefit given they account for about 50% of reported revenue. On the Japanese Topix index. “The weak currency makes them very competitive and boosts their profits,” he said. “Since the Fed [is] “If the Bank of Japan remains hawkish and the Bank of Japan is pessimistic, the interest rate differential is expected to persist,” he added. The yield on 10-year Japanese government bonds is currently around 0.8%, while its US equivalent is around 4.86%. He added that the weak yen, although not necessarily falling further, should continue to support exporters. Many of these exporters are large companies in the automotive and industrial sectors. Hurley’s top picks include industrial equipment supplier Keyence, telecoms operator Sony, financial services group Oryx, and cancer treatments developer Astella Pharmaceuticals. Meanwhile, Fidelity’s Stephenson likes funds with exposure to Japan. Among his picks is the Baillie Gifford Japan Fund, which he describes as “a growth-focused fund run by an experienced manager.” He also likes the Schroder Japan Trust, because it “allows the manager to invest in illiquid investments such as small companies.” Baillie Gifford Japan Fund’s top holdings include Internet services company SoftBank Group (5.5%), and financial services. SBI Holdings (3.7%) and technology group Rakuten (3.5%), according to its fund fact sheet. Meanwhile, the Schroder Japan Fund has holdings in several industries, including names such as electronics company Hitachi, Nippon Gas, and Toyota Motor. Elsewhere, Stevenson also suggests investors look at the iShares Core MSCI Japan IMI ETF, a “tracker fund managed by an experienced passive manager with low costs.”
#Forget #professionals #major #market #cheap #offers #opportunities
