Making money: what the experts think
Rising sun?
Morgan Stanley’s global strategy team is so upbeat about Japan that it considers it “the top stock market for 2017”, said Henny Sender in the FT. So far, global investors aren’t convinced – they are, as brokers say, “underweight Japan”. Who’s right? Morgan Stanley’s bullishness is based on three assumptions. First, the depreciation of the yen; second, that growth in Japan will be stronger than most investors anticipate; and third, that Japanese companies will benefit from “stronger-than-expected global demand”. In many ways, Japan is “in a kind of sweet spot at the moment”: the potential impact of US protectionism “hasn’t yet materialised”, and the weaker yen is spurring exports. But there may be threats on the horizon – the most significant being a “potential loss of credibility” at the Bank of Japan, which has been “consistently wrong about inflation”. The best advice for investors? Ride the wave, says Bryan Goh of Bordier and Cie in Singapore – but “keep one finger on the kill switch”.
Japanese fund picks
One reason to back Japan is that it is benefiting from “an investment revolution”, said James Connington in The Daily Telegraph: the new “culture” is much more geared “towards rewarding shareholders”. If you are persuaded of the merits, one widely recommended fund is Man GLG Japan Core Alpha, which takes a “value” approach (it actively seeks stocks it believes the market has undervalued). Another to consider is Baillie Gifford Japan Trust – an investment trust that has “delivered significant longterm outperformance” and is currently trading at a slight discount.
Chips, please
“The rush of electric car launches over the next three years is likely to hasten their adoption by consumers,” said Stephen Wilmot in The Wall Street Journal. “But guessing which manufacturer will benefit most looks like a mug’s game.” Rather than buying a carmaker, the best bet may be to buy a company making the chips that drive the motors. It’s a new variant of the old mantra of buying “picks and shovels” in a gold rush. One to look at is Japan’s Renesas Electronics: a “dominant” player in “microcontrollers” – chips that mastermind the “ever more numerous” electronic systems being built into cars.