Ruffer: Japan offers most interesting equity market risk

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Japan is the "most interesting place" to take equity market risk thanks to Abenomics, according to the managers of the Ruffer investment trust.

Co-directors Hamish Baillie and Steve Russell acknowledged Japan remains vulnerable to global shocks, but argued it is no worse than other markets. They hold 17% in Japanese equities within the £322m trust.

They said: “Unlike other developed markets, Japan is in a position of self-help and has the backing of a healthy banking sector. That makes it the most interesting place for us to take equity market risk.”

Japanese Prime Minister Shinzo Abe has the determination to “make things happen”, they added, and the government’s proactive monetary policy has helped corporate profitability.

These initiatives- often dubbed Abenomics - include the introduction of the Nippon Individual Savings Account (NISA), designed to encourage savers to invest in the stock market, and a weak currency.

However, Baillie and Russell admitted driving a move from cash to stocks by Japanese savers will not be easy: "The first quarter of 2014 is a pivotal moment for Abenomics," they said.

The managers also praised Abe’s ability to persuade corporate executives to support the economy. By raising salaries, they argued, companies can help to boost consumer spending, which in turn may help prevent falling prices.

They said: “Turning around this psychological juggernaut will not be easy, but momentum is moving Japan’s way and, with Abe at the helm, they have a man with the determination to make things happen.”

As of 31 December 2013, the share price for Ruffer investment company was 210.50p, and the net asset value was 212.11p. The trust was trading on a 0.8% discount to NAV.

It has returned 5.8% over the three years to 7 January 2014, compared to a Global Growth average of 23.4%, according to FE.

 

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