Morgan Stanley has turned neutral on Japanese value stocks. I don’t think the recent outperformance will continue. On the other hand, Goldman Sachs Group Inc. is of the view that the strong trend of value stocks will continue with tailwinds from Japan and overseas.
The outperformance of the MSCI Japan Value Index against the MSCI Japan Growth Index resumed its rapid expansion in February. Morgan Stanley said the trend could end as expectations of tighter financial conditions are already priced in.
In a Feb. 28 report, strategists led by Gilbert Wong said the market had “hurriedly” priced in the Bank of Japan’s termination of its yield curve control (YCC) policy. He now recommends a “balanced approach to finding quality growth stocks and high total yield value stocks.”
Source: MSCI, Bloomberg
Goldman, meanwhile, sees rising interest rates in the U.S. and globally, improving economic data and domestic efforts to boost corporate valuations will still give value stocks an edge.