Nomura’s Yasuhiro Mimbuta believes Japanese equities remain attractive despite facing a tough year in 2010.
Mimbuta, senior portfolio manager on the Nomura team which co-manages the £139m Witan Pacific Investment Trust with Aberdeen Asset Management, predicts corporate earnings will grow by 60% this year following large falls over the last 18 months.
He says while corporate earnings are improving across the globe, the Japanese recovery is significant because it is succeeding in spite of negative currency rates.
"Last year believing in any kind of stocks made you quite an impressive profit and after such strong results, this year will be tougher," Mimbuta says.
"Having said that, there are good reasons to believe there will upside in Japanese equity markets, the first being corporate earnings. This year we are predicting 60% growth following a collapse of 60%, which perhaps is not surprising because we are seeing corporate earnings rebounding everywhere.
"However, Japanese companies have made this growth in spite of negative currency rates. This currency factor has depressed corporate earnings by at least 15%".
Mimbuta also expects the price to earnings ratio of Japanese equities to fall in line with other markets, making it increasingly attractive for investors.
"If you look back 20 to 25 years ago, Japanese equities were trading at a PER of 30-40% but the market has gone through a major devaluing," Mimbuta says.
"If earnings continue to rebound PER should come down to around 14% to 15%, which is about the same as other markets."Save and publish
