Japanese stocks are a buy. The endorsement came from John Woods, chief investment officer of Lombard Odier‘s Asia firm, “regardless of how the US elections go.” The manager said that if Donald Trump were to ascend to the White House, the dollar would remain stable or strengthen. As a result, Japanese stocks could benefit. However, even with Kamala Harris as president of the United States, there would be benefits for Japanese equity, as trade duties would not be applied which would put Japanese companies under pressure.
Domestically, Woods believes that politics “will not be able to rock the boat in any meaningful way,” so the “prospects for consumer-led economic growth will remain intact.” Lombard Odier’s CIO considerations come at a time when Japanese stocks have lost their luster. Since its peak in July, the Topix index on the Tokyo Stock Exchange has lost around 10 percentage points, also and above all due to the recovery of the yen after a long period of weakness.
At the beginning of August, an uproar broke out in the stock markets which caused volatility to explode. The fuse was triggered by the Bank of Japan, which increased interest rates by a quarter of a percentage point. Following the move, market participants began liquidating carry trade positions that saw them borrowing yen to invest in stocks or US dollars. Of course, the shares collapsed, only to recover shortly afterwards. However, afterwards the sprint of the previous months was no longer seen. Last week the Swiss private bank raised its rating on Japanese shares from neutral to overperforming.
Yes to Japanese stocks, but not to China
If Woods expressed appreciation for stocks listed in Japan, he did not do the same for Chinese stocks. Indeed, it reiterated its cautious position despite the rally that started at the end of September following the stimulus measures by the Beijing authorities. “I think it’s momentum limited to 10-15%. Only after we see some meaningful policies behind the so-called recovery, then maybe we will be eager to invest.”
Over three weeks ago, in conjunction with China’s measures to revive the economy, Lombard Odier’s CIO, Michael Strobaek, also expressed a negative opinion on the matter. The latter eliminated all Chinese assets and moved towards US stocks, government bonds and the dollar. The expert does not believe in Chinese state stimulus as he believes that “it will not have a long-lasting and sustainable impact on either the stock market or the economy.” In essence, it is “a short-term measure to boost sentiment a bit,” he said.
