Japan Equity (FX Hedged) - WordPress.com · 2015. 2. 18. · Japan Equity (FX Hedged) Global...
Transcript of Japan Equity (FX Hedged) - WordPress.com · 2015. 2. 18. · Japan Equity (FX Hedged) Global...
Japan Equity (FX Hedged)
GlobalClients…GlobalPortfolios
disclosure: The opinions expressed in this Investment Theme report are those of the author. The materials and commentary are strictly informational and should be used for research use only. This bulletin is not intended to provide investing or other advice or guidance with respect to the matters addressed in the bulletin. All relevant facts, including individual circumstances, need to be considered by the reader to arrive at investment conclusions that comply with matters addressed in this bulletin. Charts and information used in this report are sourced from Bloomberg, Credit Suisse, UBS, JPMorgan, Morgan Stanley, and Barclays.
29
Thematic Value – Japan (FX Hedged)
Japan trades at a Forward P/E discount to both the US and EuropeAttractive Valuations
GPIF will double its target weight in equities, from 24% to 50%. A $190Bn. inflowPensions Shifting to Equities
Yen weakness will boost margins, corporate balance sheets point to share buy-backsEarnings Momentum
Japan is highly sensitive to Global Industrial Production with 60% in cyclical sectorsCyclical Equity Market
Deferred sales tax, potential corporate tax cut, and falling oil prices Improving Domestic Demand
WhyinvestinJapan?
In October, Japan announced a $150Bn. increase in monthly asset purchasesBoJ to Remain Proactive
30
Thematic Value – Japan (FX Hedged)JapanleadstheglobeinthenumberandsizeofEPSrevisions
Source: Credit Suisse
31
Thematic Value – Japan (FX Hedged)YenWeaknessisimprovingexportsandprofitmargins
Source: Credit Suisse
32
Thematic Value – Japan (FX Hedged)JapanremainsattractivelyvaluedrelativetotheUS&theEurope
Source: Credit Suisse
33
Thematic Value – Japan (FX Hedged)Japan’sDomesticDemandisexpectedtoimprove…
Higher taxes have weighed on GDP, Fiscal drag is now decreasing
Japan is a primary beneficiary of lower oil prices… boosting confidence & GDP
Source: Credit Suisse
34
Thematic Value – Japan (FX Hedged)Japan’slargestpension,GPIF,ispoisedtobuy$190Bninequities
There are $2.75Trn in total Public Pension Fund assets in Japan… A marginal 5% increase in the domestic equities allocation equates to
$140Bn in net buying, 5% of the Topix market cap.
Source: Credit Suisse
35
Thematic Value – Japan (FX Hedged)JapanwillbenefitfromaGlobalEconomicRecovery
Japan’s Earnings are highly sensitive to Global Industrial Production
Japan’s market cap is nearly 60% weighted to Cyclical Sectors ex. Energy
Source: Credit Suisse
36
Thematic Value – Japan (FX Hedged)
— December2012— BOJimplementsaggressivemonetaryeasing,— Targets2%inflationand2%realGDPgrowth— Goal:EndDeflation
— A13trillionyen($135billion)deficit‐financedgovernmentbudget— Newpublicworksspending(Largestsince2009)— CorporateTaxCuts(to25%from38%),anddeferredSalesTaxHike(to2017)— Goal:Giveshort‐termeconomyboost
— Promoteprivatesectorinvestment‐ledgrowth— Reformemployment,energy,medicalcare,agriculturalexports— Goal:Setstageforlonger‐termgrowth,improvecorporatecompetitiveness
AggressiveMonetary
Policy
ExpansionaryFiscalPolicy
GrowthStrategy
and Reform
1
2
3
Abenomics101…
37
Thematic Value – Japan (FX Hedged)AbehasbeenveryAggressive…andshouldremainproactive
Source: JPMorgan