Land of the Rising Shares
The charm of Japan continued to manifest itself to portfolio managers last week, as the Nikkei 225 rose 1%. Carret & Co.'s Gimbel says that for the first time in a long while, he is looking at Japanese stocks. Stephen Mitchell of J.P. Morgan Fleming Asset Management was also sanguine about the prospects for Japanese equities, notwithstanding a "period of indigestion" related to new supply, like Shinsei Bank's oversubscribed initial public offering last week, and sales of stock by Japan Post which is reallocating funds to new investment advisers.
Peter Cera, the strategist at Mellon Financial, observed that U.S. portfolios are increasing exposure to Japan by selling European equities. U.S. funds that invest in foreign stock had just 65% of the benchmark weight to Japan at the low, and then began increasing their exposure. Says Cera: "What is the alternative to Japan? The U.K. is raising interest rates, Switzerland is heavy on financials and health care and the Eurozone has a stubborn central bank and overvalued currency. Japan may be the destination of choice" because of its tech-heavy market and "undervalued currency." In 2003, foreigners bought ¥9.77 trillion of Japanese equities, after being net sellers in 2002. Last month, foreigners bought ¥1.4642 trillion of Japanese stock, versus ¥880.7 billion in December.
Barron's
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