Opportunities for Stock Picking in Japan

PERSPECTIVES: Threadneedle's William Davies identifies stock opportunities in the 'new' Japan

Threadneedle Investments 13 May, 2013 | 6:21PM
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This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here, William Davies, Head of Global Equities at Threadneedle Investments, on the effects of Abenomics on the stock markets and the opportunities for global stock pickers.

Quantitative easing has been credited with sparking one of Japan’s strongest rallies in decades. There is, however, a lot more to Abenomics (the economic policies advocated by the current Prime Minister of Japan, Shinzo Abe) than QE. Not only has the new government also ushered in expansionary fiscal policy in the form of corporate and investment tax cuts and higher defence spending, it has unleashed a growth strategy encompassing free trade agreements, healthcare research, employment reform and deregulation and privatisation.

In combination, these three measures – or, in prime minister Abe’s words, ‘arrows’ – have caused a monumental shift in the outlook for Japanese companies and left investors scrambling to identify well positioned companies and quantify the benefits of likely policy changes  In our view, while Japanese stocks have run up a long way, they came from a very low base and there is a lot more to go for. We think that the market is overwhelmed by the scale of changes and consensus estimates are likely very wrong.

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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.

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About Author

Threadneedle Investments  actively manages £84.0 billion of assets (at 31 March 2013), investing on behalf of individuals, pension funds and corporations.

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