Maybe, just maybe there is value

Finweek English Edition - - INVESTMENT -

I HAVE LARGELY been bear­ish on eq­uity mar­kets go­ing into the start of 2014 and main­tain that the over­all tone is likely to be quite neg­a­tive in the near term. One mar­ket that I have taken a small nib­ble on is the Ja­panese Nikkei at around the 15 100 level.

My think­ing had been to at­tempt to trade the band be­tween 15 100 and 15 500 and hope that the yen would weaken against the US dol­lar. In hind­sight, I think I might have got­ten in too early but I’m com­fort­able that Ja­panese eq­ui­ties will ul­ti­mately at­tract as­set flows that have moved out of emerg­ing mar­kets. I sub­se­quently bought in quite ag­gres­sively at the 14 400 level. I have seen one strate­gist call­ing the Nikkei down to 9 000 points by the year end, but I’m not con­vinced. The Ja­panese mar­ket has given up 10% since 30 De­cem­ber 2013, so it is well into a cor­rec­tion phase.

While the sales tax in­crease could weigh on the mar­ket, Ja­panese fis­cal and mone­tary pol­icy is likely to be ac­com­moda­tive for the stock mar­ket for the re­main­der of the year. Re­search house BCA also points out that the Ja­panese are en­cour­ag­ing do­mes­tic pen­sion funds to in­crease their ex­po­sure to lo­cal eq­ui­ties. If this hap­pens then the Nikkei could be primed for a bounce.

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