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Sparx: Investors are missing a lot of opportunities in Japan

Thursday, July 22, 2010
Opalesque Industry Update – Investors who still think that Japan is a perennially unattractive destination, especially to asset allocators, are missing a good opportunity, says Shuei Abe, chairman of Sparx Asset Management, a Japan-based alternative asset management firm with $32.13m (JPY2.79bn) in AuM.

Abe said during a presentation in Tokyo that better times for Japan are just around the corner, reported newswire Asian Investor.

"Asia is an exciting growth factor. We share cultural similarities. It seems investors have given up on Japan, but will they be right or wrong?” he asked, adding that he believed those people who are leaving the region’s markets are wrong.

The lowest drop in the Nikkei 225 for this decade was recorded in October 2008, and investors remain pessimistic on Japan’s growth prospects. It fell again in 2009 when the Democratic Party won the Lower House seat. At that time, the ratio of the MSCI Japan Index to the MSCI World Index fell below 0.5 to around 0.4, and it continues to remain around that level.

But Abe believed there is opportunity within this pessimism.

He dismissed speculations that Japan’s current economic recovery is only temporary and insisted that the country would be the prime beneficiary of Asia’s growth. He cited statistics which showed that the average corporate sales and recurring profits for fiscal year 2010 are expected to be growth figures of 6.1% and 37.5%, respectively.

Abe’s optimism towards Japan was shared by Sandro Antonucci, Geneva-based vice-president of funds selection at Swiss private bank Lombard Odier. He said last month that despite being unloved by fund managers, Japan’ stocks remain attractive and it is worth having exposure to this market.

At the start of Thursday’s trading, the Nikkei Stock Average lost 0.4% to 9,245.5, while the Topix dropped 0.4% to 825.9, reported MarketWatch. With the U.S. dollar falling into the 86-yen range, Tokyo-listed companies suffered a beating.

News of Federal Reserve Chairman Bernanke’s testifying before the U.S. Congress that the American economic outlook remains “unusually uncertain” sent the Japanese markets, as well as other Asian and Wall Street markets, tumbling, Bloomberg reported today.

Mitsushige Akino, who oversees about $450m in assets in Tokyo at Ichiyoshi Investment Management Co., said that Bernanke’s testimony had disappointed a lot of people, and that investors would shy away from Japanese shares until they feel confident that the Bank of Japan would initiate measures to mitigate against the stronger yen.

Fund managers cut allocations to Japan
A recent survey commissioned by the Bank of America Merrill Lynch (BofA Merrill) showed that fund managers are cutting down their allocations into Japan and the U.S. and instead prefer emerging markets, including China as their new investment destination.

The survey added that global allocators dropped to a net 11% underweight on Japan ending a three-month optimistic period.
-Precy Dumlao

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