We missed the first month of the Nikkei move but upon Prime Minister Abe's election had the sense to post "Japan's Nikkei is In the Early Stages of an Historic Move" on December 17 and "John Mauldin: This Will Be one of the Greatest Trades of My Life".
From Barron's Penta blog:
Last week, UBS’ gathering of leading chief investment officers proved a bit of a snooze, until the panelists perked-up on the topic of the Japanese stock market. It was nice to hear them bicker amidst all the day’s uniform pleasantries. Some of the strategists worried that Japanese equities were little more than a momentum trade, which would ultimately turn around, while others seriously liked the medium-term prospects of Abenomics, the nomenclature for Prime Minister Shinzo Abe’s attempt to revive the sluggish Japanese economy. (For more on Abe, see today’s WSJ interview with the Japanese prime minister.)Possibly of interest:
UBS is largely siding with Abe and has invested significantly in Japanese equities since May, when it began advising that its clients build that position, now at an outsized 28% of their allocation to international developed stocks’ 8.5% of the model portfolio’s total. UBS’ other overweight allocation is to U.S. stocks, 21% of the overall portfolio, as explained in “Rubber-Duck Investing.”
The two positions are similar, explained UBS Wealth Management’s Alexander Friedman, the global CIO, and Mark Haefele, its head of investments; both are driven by an improving economy and significant monetary easing. “We think that for better or for ill, the story going forward is one of central banks,” said Haefele, in a pre-conference interview with Penta. “The Fed is going to taper at some point in the near future, but that’s not in the cards for Japan.”
The Bank of Japan is taking extraordinary measures, triple the Fed’s efforts in proportion to the Japanese economy, so coupled with policy action, Haefele and Alexander think these measures will ultimately end the deflationary spiral and feed consumer optimism. Expect upside earnings surprises. Japan’s companies had to become lean to survive during decades of stagnation, so any earnings growth coming from exports and a devalued Yen should flow right to the bottom line.
Even though the Nikkei is already up about 40% this year, Friedman and Haefele still like export-oriented Japanese companies, due to the weaker yen and their prediction that a capital expenditure revolution is coming, an event not seen in 20 years. The twosome also like Japanese financials because they are levered to the cyclical recovery. Essentially, as the economy begins to recover so do the loan portfolios and hence profits of banks. See Lauren Rublin’s coverage of Barron’s Art of Successful Investing conference, in which David Herro, CIO of Harris Associates, recommends buying Daiwa Securities (ticker: 8601.Japan), a Japanese retail brokerage and wealth management firm....MORE
"No typo: Analyst sets Nikkei 63 million target" (it's Société Générale's Dylan Grice)
