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Turning
Japanese
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Hopes
of a sustained recovery
Japan
staged a strong recovery in 2003 with the Nikkei creeping
higher and GDP growth of around 7 per cent from the last quarter
of the year.
Investors
will now wonder whether the results can surge forward again
in 2004. Kazuhito Yoshihara, fund manager of the Fortis L
Fund Equity Japan is someone who believes that the recovery
has a firmer base this time round and that there are still
good opportunities to be had from the market.
Yoshihara
runs the fund from Tokyo with four other managers who each
research and construct separate sectoral portfolios. He says
that the main benefit of being based in Japan is that they
are able to visit lots of companies and closely understand
the stocks they invest in. Last year they were able to see
more than 1,700 companies.
Stocks
are selected with regard to their long-term attraction, with
the managers concentrating on the cashflow of each company.
After this stage, further analysis is carried out that is
more individually focused on the company’s line of business.
Once a
stock is thought to be of value to the portfolio, the manager
will then consider what factors will affect its performance
in the coming months. If the news appears to be positive,
for example if the company is being reorganised or is soon
to announce a redemption of the shares, then they decide to
invest.
Yoshihara
is positive that the level of change in the country will have
continuing bonuses in the future. “Profits per share
are actually close to the high limit of their historical range,
the positive effects of the reorganisations having just started
to produce effects. We also observe a change in mentality
within Japanese company management, with the shareholders’
interest being taken in to account for the first time.”
He goes
on to say that he believes equities in the country remain
cheap. When asked if he thinks it is too late to invest in
Japan after last year’s gains, he responds: “Absolutely
not! This time, the rally experienced by the stock market
has been motivated by the effective recovery of the private
sector and not by an increase in the public expenditure. We
consider that this rally is stronger and more sustainable
than the previous ones.”
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