Until fairly recently, the Japanese equity market has been lacklustre. The election of prime minister Shinzo Abe promised to change this with reforms designed both to stimulate the economy and encourage wider ownership of domestic equities. His recent re-election confirms the promise. And the market is beginning to stir. The column ‘Contrarian pointers for 2018’ (9 February 2018) reminded readers of the market’s potential. The time has come to further add to exposure.
Sentiment trailing fundamentals
The Japanese market is looking attractive on a range of valuation metrics, including price-to-book – this being an estimate of what a company would be worth if its assets (minus liabilities) were sold for their balance-sheet values, expressed usually in terms of book value per share. Indeed, despite some recent outperformance, the equity market’s rating remains good value when compared to both its own long-term range and many other equity markets.