Japan: Ein Update zur Investment Opportunität!

30. April 2014

Japan ist wieder an einem Punkt angekommen, an dem es sich mittelfristig rechnen dürfte im dortigen Aktienmarkt zu investieren! Seit Jahresanfang ist der Index Nikkei 225 deutlich zurückgekommen. Die fundamentalen Daten sind aber besser als in der Vergangenheit und die Bewertung niedriger als bei weniger aussichtsreichen Aktienmärkten.

BildQuelle: Finanzen.net

Bitte lesen Sie den nachfolgenden Artikel:

Here is an article by SRIM about the current opportunity in Japanese equities which I can fully support:

The first quarter of the year has seen wholly unwelcome relative and absolute underperformance from Japanese equities (Chart 1). Our portfolio, in particular, has given up a sizeable fraction of last year’s gains. Japanese shares have now relinquished all of their relative gains versus global markets since the autumn of 2012. Within this, the greatest weakness has been in large cap shares, again to the detriment of our portfolio, whilst our strategic policy to hedge the yen has also proven to be an added headwind. The lack of easing by the Bank of Japan in anticipation of the increase in the consumption tax has certainly been a negative, but we find it hard to argue that much else has disappointed.


In a fundamental sense, we suggest that the arguments which we put forward in our investor note of Spring 2013 remain valid. Japanese profitability has recovered very sharply and continues to rise, and earnings expectations continue to improve. A glance at Chart 2 indicates that Japanese shares are far from expensive. P/E multiples in Japan are now substantially lower than in either the US or in Germany, which is unusual.


Charts 3 and 4 show that Japanese valuations have fallen markedly in the face of strong profits growth and accommodative monetary conditions, which is also unusual.


Part of the problem in Japanese equities arises from the evident lack of institutional depth in the market, a risk that was explicitly recognised in our letter last year. Specifically, we noted that in the light of ongoing very low interest rates, Japanese financial institutions were liability constrained from increasing their equity weightings. This implied that the marginal buyer and seller of Japanese shares was likely to be an overseas investor. Chart 5 shows the extent to which this has been true on the buy side. Unfortunately, we did not suspect that selling pressure would arise even as the S&P 500 trades within a shade of its record high.


A further part of the surprising weakness in Japanese shares has come from the unwinding of net long futures positions in both the Topix and Nikkei indices. A portion of these will have been speculative, unhedged positions. These are or were predominantly held by overseas speculators. However, Chart 6 shows the extent to which futures unwinds created net selling in the market, a risk that is now very substantially mitigated. In fact, looking at trading in individual shares, Chart 7 appears to indicate that short-sell ratios in the Japanese equity market are close to historical highs. Of course, these positions are highly vulnerable in the event of a rally in Japanese stocks. It certainly appears that the dominant portion of the selling in Japan has been from overseas investors who were disappointed by the relative performance of Japan and did not need to be invested there.



Perhaps we could and should have foreseen this or reacted to it more forcibly? It is true that neither the US dollar nor US bond yields have risen in this year, contrary to widely held (including our) expectations. However, our focus has been on the improvement in Japanese corporate profitability and governance.

The medium to longer-term investment arguments remain compelling, in our view, with few adjustments in the domestic risk profile. The arguments can be summarised as:

– Reflation

– Improved corporate profitability and governance

It is obvious that Japan’s political and monetary authorities are deeply committed to reflation. The Bank of Japan is doubling the size of its monetary base. The government has explicitly reaffirmed a 2% CPI target and implicitly targets negative real interest rates. The consequences of these policies are more or less predictable! Commercial banks have begun to expand their balance sheets. For the first time in twenty five years, Japan has the semblance of an upswing in the credit cycle. Wages are beginning to pick up and this is especially vivid when measured to include corporate bonuses. Condominium, house and land prices are recovering. Commercial rents appear, to us, to have made a decisive cyclical low. Anecdotal evidence of recovering jewellery and fashion sales and moderate labour shortages add to the picture of an economy escaping two decades of deflation. This is perhaps best captured by the steady rise in Japanese index-linked breakeven rates in Chart 8.


Investors worry that the increase in consumption taxes will, in some way, undermine the clear trend towards reflation. They argue by analogy with 1997, when higher taxes did indeed depress consumer demand and added to deflationary pressures. Yet the differences with the earlier period are stark. There was no monetary reflation in 1997 and other demand measures were exceptionally weak, especially property and land prices. Further, overseas demand was depressed in the aftermath of the Asian crisis.

Meanwhile, the evidence for improved corporate governance is gathering strength, almost on a weekly basis. In fiscal 2013, Japanese corporations will make record dividend payments, just one year into the economic recovery. Leading companies, such as Toyota, have raised payout ratios. Where Japan lags, especially in comparison with the US, is in the quantum of share buybacks. These remain below the levels recorded in 2006-08, for reasons that are unclear as Japanese companies are awash with cash (Topix companies have more than ¥70 trillion of net cash on their balance sheets). However, we find the forecasts by many sell side analysts (e.g. Goldman Sachs, Chart 9) indicating a major recovery in share buybacks entirely credible. Leading Japanese companies have announced substantial share buybacks in a manner totally at variance with past behaviour. Toyota is an excellent example, announcing a 2% share repurchase during March, following years of resistance. Mitsui and Co, a quintessentially ‘establishment’ Japanese trading company, announced a 2% buyback at the end of February. The reason Mitsui gave for the repurchase – the first ever by any Japanese trading company – was to improve its return on equity (RoE). And Mitsui borrowed money to facilitate the transaction! It is probable that these share purchases will act as a standard for other companies to emulate. Even the more state-owned companies, such as NTT, are following suit. NTT’s total payout ratio including buybacks exceeded 100% in FY 2013 and has the potential to do so again next year.


It is, in our view, hard to overestimate the importance of the introduction of the Nikkei 400 index in January this year. In a crucial departure, this index includes RoE and corporate governance indicators alongside market capitalisation as criteria for inclusion. Softbank is the largest stock in the index but several well-known large Japanese stocks (e.g. Panasonic, Daiwa Securities) are excluded on the grounds of poor or negligible profitability. One of the criteria for ‘good’ governance, which was codified in April last year, is the inclusion of independent directors. Chart 10 shows that this can lead to a meaningful improvement in RoE.


The most important future development in corporate governance will be the reform of Article 16 of the labour law which will clarify how and when labour redundancy is, ex-ante, permissible. This may have a dramatic impact on Japanese corporate behaviour, we understand. In addition, it is probable that Japan’s corporate cash pile exists partly in anticipation of large labour downsizing.

It appears to us that relatively few investors appreciate that Japanese corporate profitability is already at the highest levels since the late 1960s. Moreover, the 9.5% – 10% RoE likely to be seen in March 2014 results occurs with only one of the key drivers of profitability moving decisively in its favour. This is illustrated in Chart 11, which shows the marked increase in corporate profit margins. However, it is probable that leverage, asset turns and corporate tax burdens all improve over the next two years and we remain of the view that Japanese RoEs are headed towards 15%. In fact, this seemingly aggressive forecast will prove conservative if, as is likely, corporate tax rates are reduced to international levels.


Some investors argue that translation gains from yen weakness are the major (or only) reason for higher Japanese profits. In addition, they call into question the notion of paying higher multiples for ‘mere’ translation gains. Goldman Sachs, admittedly a bull, argues that the level of sales and margin are a far more important source of profit growth. This is illustrated in Goldman’s forecasts for profits growth this year, in Chart 12. In other words, transaction gains can be much more important than translation gains: We see this borne out at a practical level in many of our stock selections including Rohm, NGK Spark Plug and Bridgestone.


Investors in Japan will have heard scepticism about supply side reform, that the ‘third arrow’ is ephemeral. We believe that this reflects greater frustration with the market’s performance than the likely reality. From our perspective, Abenomics has created some solid supply side reforms, with more in the offing.

Japan has broadened the tax base, formulated rural and agricultural reform, supported the introduction of the Nikkei 400, proposed Government Pension Investment Fund (GPIF) reform and is introducing new economic zones (NEZs). The NEZs are particularly important as they cover approximately 38% of Japanese GNP and will be the experimental grounds for reforms in labour markets and in immigration.

2014 has seen a succession of investment themes reverse their relative performance of last year. Japan is the most conspicuous of these and in our opinion the least deserving. Improved profitability is a fact, not a speculation, and investors are paying little if anything for the optionality of supply side reform, sustained better corporate governance and tax reform. These three features would lift Japan’s RoEs to 15% and more, in all but the most recessionary of overseas conditions. Aside from temporary strength in the yen, the risks to investing in Japan focus mainly on the lack of domestic institutional support for equities. In the light of the enormous valuation differential in favour of domestic equities over JGBs and GPIF reform, this anomalous situation will not be sustained for Long.


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