Weekly newsletter 28 December 2015

2015 is almost over and for investors it was a wild year with ups and downs. The market showed strong movements, especially in emerging markets. 20215 is almost over and we must start looking ahead to 2016 to see where the opportunities are. The market doesn’t always unanimously agree about opportunities and the Japan stock market is one of them. I have spoken with multiple fund managers and they seem to be divided about it. Personally, I think it’s an opportunity for investors and I will try to make my case below.

Goldman Sachs has provided their outlook for 2016 and below we can see which market they believe will perform stronger than others.

 

 

TOPIX (Tokyo index) is going to make according to them a double digit growth. The European equity market (STOXX 600) is also going to grow strong (in one of my earlier newsletter I have made my case for it).

Below are the reasons why I think that the Japan stock market is going to outperform other markets in 2016:
- The economy is going the right direction; low unemployment and growth in real wages
- The government is making progressive policies; Trade Pacific Partnership signed (TPP) and cutting the corporate tax
- Improving corporate earnings and governance; better board structure, more efficient allocation of capital, Japanese companies are cash rich and Japan prime minister (Shinzō Abe) is stimulating Japanese companies to provide shareholders higher dividends and to increase their share buybacks and this is already leading to positive results.

Goldman Sachs is not the only company positive about Japan, this what Blackrock has to say “We prefer stocks over bonds, particularly European and Japanese equities.”

Overall we can conclude that the Japan stock market has attractive features. A weakening Japanese yen, further monetary easing, and a cyclical recovery of the Japanese economy supports my positive outlook. In addition, Japan remains supported by attractive valuations and further upside in earnings.



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