With mounting overseas investor interest and a stock market that is trading, in yen terms, at 30-year highs, we review our optimistic December 22 Japan thesis, Sugoi Desu Ne (enclosed). The conclusion remains the same. A once in a generation transfer of wealth from corporates to shareholders remains a multi-year investment thesis with attractive valuations. Critically, this is supported by the recent intervention from the Tokyo Stock Exchange (TSE) over corporate governance directive as the final piece of the strong investment story.
While Japanese equities were popular with Swiss asset managers in the late 1980s, the world’s 4th largest economy has now all but disappeared from our portfolios. Perhaps the time has come to turn our sights back to the Rising Sun, because after a long stock market winter, Kabuto-Cho could be in for a bright new dawn.
After 3 years, China has finally reopened its doors to foreign travelers. Alice Wang, manager of a Chinese and ex-Japanese equity strategy at Quaero Capital, has just returned from a 3-week trip to China. In the following text, she shares her impressions, sometimes anecdotal, based on numerous meetings and visits throughout the country.
We continue to be cautious on the rest of the world ex-China this year and highlight our key themes ex-China recovery: we do believe that USD has peaked, and that more geopolitical tension as well as central bank buying will be good for precious metals. We also believe that some commodities, such as copper, are more exposed to a China recovery, and that commodities on the whole have suffered from under-investment in the past decade. For the first half of the year, we park most of our ex-China exposure in metals as we wait for better opportunities in the second half of the year. We have a few idiosyncratic theses scattered around the region, but we err on the side of caution as flows back to China can impact even solid companies elsewhere, particularly the outperformers from last year.
The ongoing conflict in Ukraine and its repercussions remain the primary theme impacting investment decisions in the region. This consists both of the factors impacting global markets, but also, more nuanced regional only influences.
This year may be starting off well for the Chinese market, but it is not starting off well for Mr Xi. People are quietly seething at the rapid pace of reopening, both on account of the lack of psychological and medical preparedness, and also – why go to all the effort of zero-COVID for two years if herd immunity is the only solution in the end?
We have been informed of the fraudulent use of the identity of Quaero Capital and of its employees in order to offer investment services and financial products at high returns and in an extremely aggressive manner. The fraudsters may have e-mail addresses or domains that use the Quaero Capital name but in fact have no connection with Quaero Capital and are not authorised to act on our behalf. It should be noted that Quaero Capital never conducts banking and will not solicit investment business from the public, nor will we ever ask members of the public to open an account with us or transfer money to us.
If you receive a communication as referred to above, we recommend that you exercise extreme caution, and would encourage you to check carefully the contact details of the people offering these services. In case of unusual contacts or inappropriate requests, please contact us at the following email address info@quaerocapital.com.
