Sumitomo Mitsui Trust Asset Management (SuMi TRUST) on Japanese equities - looking for a bounce back after the sharp sell-off:
- Japanese equity market dropped sharply in early August on weak US data and yen strength
- SuMi TRUST strategist Hiroyuki Ueno sees this as temporary correction
- Yen appreciation driven by diverging Fed/BOJ policy expectations
- Ueno: Market should return to uptrend as Japanese corporate earnings remain robust
- Double-digit earnings growth expected for FY2024-25
- Solid demand seen from domestic and foreign investors waiting to enter market
- Overall outlook positive as Japan exits deflation cycle and economy normalizes
Key quotes:
- “In the short-term, the market may continue to be swayed by foreign exchange rates and the monetary policy of both Japan and the US. However, in the mid to long-term the market should calm and return to its former upward trend because Japanese corporate earnings remain robust and Japan’s economy as a whole has been able to escape its deflationary cycle and continues to normalise”
- "Overall, corporate earnings in Japan are robust, and the Japanese economy is exiting its deflationary cycle; these factors will support the market's return to an upward trend"
The bottom line: Recent volatility presents buying opportunity in Japanese stocks as fundamentals remain strong.
