ANNOUNCEMENT: Expert Investor is now PA Europe. Read more.

Time to bail out of Japanese equities?

Even though Japanese equities were the best performing asset class in 2015, fund selectors have retained an ambivalent attitude towards them. And with good reason, it has now turned out.

The Bank of Japan cutting rates well into negative territory at the end of January was widely regarded as an act of desperation by investors, wiping out all returns from 2015 and sending down the benchmark Topix index to its lowest level since December 2014. So should we conclude this is all the country can manage, even with a vast quantitative easing programme and rock bottom interest rates?

With Japan reporting its economy shrunk 1.4% in the fourth quarter of 2015 on an annualised basis, investors may indeed well be asking what prospects there are for the aging nation from here.

There is justifiable optimism about the positive impact that corporate reforms and increased workforce participation by women could have, but this may well take many years to feed through into share prices.

In the meantime perhaps investors should bank any money they have made in the period immediately after the QE programme launched and have another look in five years’ time.

Looking at the chart below, many investors who added broad exposure to the market in 2013 or 2014 could still pocket a nice profit if they bail out now.

The direction of travel this year so far looks ominous though, meaning those who sit tight could be back where they started or even in loss making territory if things do not change quickly.

MORE ARTICLES ON

MORE IN

  • Can M&A and buybacks breathe life into UK market?

    Can M&A and buybacks breathe life into UK market?

    Both buybacks and M&A should help realise value in UK shares, boosting prices and giving investors another reason to consider the UK stockmarket Not only does M&A activity appear to be picking up, with a high-profile bid for UK electronics retailer Currys, but the scale of company buybacks continues to accelerate. If it goes well,…

  • Capital Group launches multi-thematic Article 8 funds

    Capital Group launches multi-thematic Article 8 funds

    Capital Group has launched a set of multi-thematic sustainable funds that are available for investors in Europe, writes Christian Mayes. The Capital Group Sustainable Global Opportunities fund (LUX) will invest in global equities, while the Capital Group Sustainable Global Corporate Bond fund (LUX) will target fixed income exposure. The launch also includes a multi-asset offering…

  • Bond funds pull in €29.7bn in January – LSEG

    Bond funds pull in €29.7bn in January – LSEG

    Bond products were the best-selling asset class in January, according to LSEG Lipper’s European Fund Flow report, writes Christian Mayes. The asset class pulled in a net €29.7bn in the month, while Money Market USD grouping was the best-selling Lipper Classification after receiving €11.2bn inflows. Providers of mutual funds pulled in €22.5bn, while passives saw net…

  • Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    Quarter of Article 8 funds at risk of greenwashing – MainStreet Partners

    A quarter of all Article 8 funds could be accused of greenwashing based on their sustainability framework and practices, according to MainStreet Partners, writes Christian Mayes The 24% of funds classified as a greenwashing risk by the 2024 ESG Barometer report marks a four percentage point increase from the 20% flagged at the end of…

  • EU green rules could stymie decarbonisation projects – ExxonMobil

    EU green rules could stymie decarbonisation projects – ExxonMobil

    The European Union’s climate regulations may lead to it halting its investments in Europe, ExxonMobil has warned. Speaking to the Financial Times, Karen McKee, president of the product solutions division, said the oil and gas giant had struggled to begin decarbonisation projects in Europe due to the regulatory burden. The result, she added, was that…

  • ICE flags need for Europe to double green investment

    ICE flags need for Europe to double green investment

    Investments to modernise energy and transport must double by the end of the decade to reach 2030 climate targets, the EU has been warned. According to the Institute for Climate Economics (ICE), which has released the European Climate Investment Deficit report, the bloc lacks what it calls a “consistent tool” to ensure monitoring of the…