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Threadneedle Backs Japan as Market for 2018

Asset manager Columbia Threadneedle has revealed that it is heavily invested in Japanese equities going into the New Year

Emma Wall 30 November, 2017 | 2:38PM

Japan flag

Japan is the market to watch for 2018, according to Columbia Threadneedle. The asset manager has revealed that Japan stocks are its largest overweight relative to the benchmark among its global and multi-asset portfolios. 

Chief investment officer Mark Burgess said that Japan offered political stability in a world of uncertainty and that the re-election this year of Prime Minister Shinzo Abe would be supportive for the stock market.

"Japan is our favourite market for 2018," said Burgess. "There is supportive policy regarding interest rates, the economy is growing, the government is buying equities and the corporate sector is finally getting capitalism. 

"Companies are prioritising shareholders, focusing on return on capital employed, rising profits. Plus, valuations are low for Japanese stocks relative to other parts of the world."

Bullish on Equities, Even US Stocks

Threadneedle is positive on equities in general, and thinks talks of an imminent correction are overdone.

"All stock markets across the globe have performed very well this year, thanks to global economic growth and supportive central bank policies," said Burgess this week. 

"We recognise there are political risks around, but we do not think they are sufficient to derail global growth or markets. If anything poses a risk to markets it's inflation – although we think this will stay pretty low."

Excluding the UK, which is being hampered by Brexit uncertainty, the global economy is experiencing synchronised growth, which alongside improving corporate profits will support this ageing bull market for some time yet. 

Threadneedle global equities fund manager Neil Robson said that while returns would be less than shareholders had experienced since the global financial crisis - the S&P 500 has risen 390% since 2008 - the market would continue to rally. 

"If the stock market keeps going for another six months this will be the longest bull run in history. But it does not feel like a dying market. You do not see bull markets end when fundamentals are accelerating," he said.

He pointed to technological innovation as the source of recent - and future - returns, saying that the broad competitive advantages the tech giants had built around their businesses made them almost impossible to topple or derail. He predicted even greater share price growth for Google parent company Alphabet (GOOGL), Amazon (AMZN) and Facebook (FB).

"Categorised by sector technology stocks make up 18% of the market, but tech is the whole market. We are considering how it will change every single business sector and looking for companies that embrace digitalisation and innovate. Take EOG resources for example, a mining company. They use big data to ensure they drill in the right place for oil."

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
Alphabet Inc A1,051.97 USD0.25
Amazon.com Inc1,168.92 USD0.60
Facebook Inc A179.04 USD0.02
About Author Emma Wall

Emma Wall  is Senior Editor for Morningstar.co.uk