Are Japanese shares finally about to boom?
the Japanese economy was the envy of the world in the Seventies and eighties.
After two decades of rapid growth, it had become the second richest nation on earth, behind the U.S.
however, a debt crisis and a stock market crash in the early Nineties plunged Japan into years of economic stagnation, which are tellingly referred to as its ‘lost decade’.
Investors pulled their money out of the so-called Land of the Rising Sun and most have never returned.
But fund managers believe Japan has turned a corner. Its economy has been growing steadily for nearly two years — a sign that prime minister Shinzo Abe’s sweeping economic reforms are bearing fruit.
Mr Abe is expected to continue his crusade after he won a landslide majority in a snap election on Sunday. the Japanese stock market surged more than 1.1 pc after the election.
David Jane, manager of CF Miton Cautious Multi Asset Fund, who invests all around the world, says: ‘Investors have avoided Japan for so long, which doesn’t make sense given it is full of global leaders in robotics and in healthcare.’
So how do you profit from Japan’s recovery?
Ben Yearsley, of advisers Shore Financial Planning, is a fan of Mr Jane’s fund, which has turned £10,000 into £13,410 in five years. More than £7 in every £100 of savers’ cash is invested in Japanese companies.
FANUC is one of the fund’s major picks. It makes industrial robots that can assemble cars and make electrical components (Apple uses the firm’s Robodrill to make the cases on its iPhones). In the past year its sales have totalled £3.6 billion and are expected to grow to £3.8 billion in the coming year.
Another firm Mr Jane invests in is Omron, a manufacturer of blood pressure units, diabetes tests and fat monitors.
An alternative option, says Jason hollands, of broker Bestinvest, is Baillie Gifford Japanese. One of its biggest picks is Rakuten, Japan’s answer to Amazon and the country’s biggest e-commerce business. It also owns the Kobo, the electronic book reader, which, like Amazon’s Kindle, lets you store thousands of digital books.
In November last year, the firm struck a four-year sponsorship deal with Spanish football giants Barcelona worth roughly £188 million.
the fund, which invests £2.70 in every £100 of savers’ cash in Rakuten, has turned £10,000 into £26,230 in five years. Another major stock in the fund is toyota, accounting for £2.70 of every £100 of savers’ cash.
Schroder tokyo is another fund that’s backed the giant car manufacturer. toyota is its biggest holding. the firm, which is worth roughly £153billion, has promised to have driverless cars that turn, brake and accelerate by themselves on the road by 2020.
the fund invests nearly £4 in every £100 in toyota and has turned £10,000 into £21,380 in five years. Laith Khalaf, of broker hargreaves Lansdown, believes Schroder tokyo is one of the best ways to buy into the Japanese economy.
Darius McDermott, of stock broker Chelsea Financial Services, tips Schroder Multi-Manager International, which invests £11.90 in every £100 in Japanese companies.
It is what’s known as a ‘fund of funds’. this means it generates returns for savers by investing cash mainly in other funds, although it does invest in individual firms, too.
Marcus Brookes, manager of Schroder Multi-Manager International, says: ‘Japan has always had world-class companies. the problem was they didn’t necessarily deliver great shareholder returns.
‘Japan isn’t quite there yet, but it is now behaving in a manner that international investors prefer.’
Mr Brookes has turned £10,000 into £20,930 in five years.
While Japan has shown signs of recovery, experts urge caution. Mr Yearsley, of Shore Financial Planning, says: ‘I am positive about Japan, but don’t pump all your cash into the country. While there has been improvement in its economy, it’s not out of the woods yet.’