The Tokyo-based asset management firm’s investment committee said it continues to favour a moderately overweight stance on global equities, with a heavily overweight position on Japan and an underweight position on the US.
“Nikko Asset Management believes the recent Japanese GDP data overstates the decline in the economy and continues to be optimistic about growth in the world’s third-largest economy,” a statement from Nikko AM said.
“Japanese equities could be supported by rising profits, especially as valuations remain attractive and as the [Bank of Japan] and the Government Pension Investment Fund are expected to be large-scale buyers,” it said.
Nikko AM chief global strategist and head of the global investment committee John Vail pointed out that deflation is over in Japan, and the structural bear market in equities is also “dead”.
“Japanese investors will continue to be forced to change their methods, as [the Tokyo Stock Price Index] TOPIX is already yielding far above all but a few fixed income investments,” Mr Vail said.
“This factor should accelerate as we expect the TOPIX dividend to double in the next five years,” he said.
Nikko AM also said developed economies are set to grow at a modest pace backed by healthy economic growth in Japan, the US and the Eurozone (G3 economies).
“We realised that there are many risks globally and the oil price plunge has surprised us along with nearly all other investors, but we think these risks will be overcome and note that lower energy prices are very positive for most developed economies,” Mr Vail said.
