Backlog in Japanese shares: valuation level is a prognosis for the entry

“Due to the current valuation of Japanese companies, here we are experiencing a backlog with other stock markets”, says Dr. Peter Fischer, executive board member of GAMAX Management AG, who sees a favourable time to enter. The fund invests in each of the five countries, whose economy the fund management awards a particularly high potential for surprise.

After a decade-long low, investors are once again placing a strong focus on Japan. “The valuation level of Japanese shares is currently exceptionally attractive. Many export companies are also debt-free and have high net capital positions”, says Dr. Peter Fischer, GAMAX Management AG executive board member. Since the start of November 2010, Japanese shares have for the first time in a long time performed better than the MSCI World Index. The fund management of Mediolanum GAMAX Funds Five Countries Select therefore made the decision to replace the Dutch share proportion with Japanese title companies. Alongside Japan, the fund is currently investing in the investment regions Germany, North America, United Kingdom and Hong Kong / China.

Growth forecast conceals potential for surprise

In recent weeks the long-standing appreciation of the Japanese Yen has slightly declined. Ultimately, exporting companies were the ones hit hardest by this. If this decline continues, this could lead to a further relief of strain of the companies and could have a positive effect on the overall market. The continuation of the global economic growth could also provide positive potential for surprise on the Japanese stock market. This is also the case, since the Japanese government has downwardly revised its growth prognosis for 2011 and adjusted the expectations for the Japanese economy accordingly. This could also lead to a reduction of underweighting in Japanese shares among institutional investors.

China’s monetary policy under observation

Although the USA’s significance as a foreign trade partner of Japan has decreased in recent years, American consumers are still important consumers of Japanese products, particularly in the technology sector. It is thought that the good Christmas sales of 2010 could have particularly positive effects on the quarterly figures of Japanese companies. During this, the monetary policy of China, Japan’s most important trade partner, is under particular observation. “A more restrictive monetary policy in China to tackle inflation conceals the risk of slump in growth and would also affect Japan’s export economy”, points out Fischer in terms of possible outside influence.

Focus of automobile values

In selecting Japanese share values for the portfolio, the fund management is concentrating on export and technology companies with a favourable capital and cash flow evaluation. One example of these companies is the car manufacturer Suzuki Motor. “As market leader, Suzuki Motor is positioned in the strong-growing Indian car market. A possible increase in the investment of Volkswagen shares in Suzuki could provide further market price fantasies”, says Fischer. The conglomerate Sumitomo Electric is also active in the automobile industry. The company supplies components for the electrical cabling of cars and impresses with its attractive performance indicators.

Transparent Investment Strategy

Currently Japanese shares account for approximately 12% of the net asset value. The two largest investment regions in the portfolio are Germany with 29% and North America with 25%. “The capital gains with Dutch shares and the simultaneous increase in the Japanese stock market follow our strategies of building up assets while consistently taking advantage of growth trends”, says Fischer, explaining the concept of Mediolanum GAMAX Funds Five Countries Select developed by GAMAX Management AG and managed by DJE Kapital AG.