World’s Highest Stock Valuations Signal Japanese Recovery
By Lynn Thomasson, Yoshiaki Nohara and Lu Wang - Apr 23, 2012
Japan’s stock market, hobbled by more than a decade of deflation, is showing companies will stage a full earnings recovery from the worst nuclear crisis since Chernobyl, pricing in the biggest increase in profits compared with other countries since 2001.
Income in the Nikkei 225 Stock Average (NKY) will rise by 69 percent in 2012, after plunging 31 percent last year, according to more than 2,600 analyst estimates compiled by Bloomberg. At 24.5 times reported earnings, Japanese equities are the most expensive among the world’s 60 biggest markets, trading so high that only by meeting analysts’ forecasts will ratios come back in line with global stocks, data compiled by Bloomberg show.
“The worst is over for Japan in terms of earnings,”Masafumi Oshiden, an investment manager at ING Mutual Funds Management Co. (Japan) Ltd., said in a telephone interview on April 18. The firm oversees about 1.5 trillion yen ($18.4 billion). “ Consumer spending is improving and corporate earnings are rebounding. The cautious mood following the quake is gone.”
Bulls say the valuations show confidence in a recovery that will help Japanese stocks close the gap with the MSCI All-Country World Index, which has risen almost three times as much since 2009. Bears point to combined annual losses from Sony Corp. (6758) and Sharp Corp. of 900 billion yen and an economy that has contracted three of the past four years as evidence the Nikkei 225, which has rallied 17 percent since November, has come too far, too fast.
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