Japan shares to benefit in value investing revival, Daiwa CEO says
22/12/2022 09:00
By Makiko Yamazaki and Ritsuko Shimizu
TOKYO, Dec 22 (Reuters) - Japan's stock market is
drawing renewed interest from overseas investors, as global
inflation bolsters the case for value investing while Japan's
shares remain undervalued despite record profits, Daiwa
Securities Group Inc's 8601.T CEO told Reuters.
"Japan is one of the most prominent markets for value
stocks," Chief Executive Seiji Nakata said in an interview.
He pointed to billionaire Warren Buffett's recent investment
in Japanese trading houses and a surge last month in foreign
investors' net buying of Japan shares as evidence of the trend.
Historically, value stocks, or stocks trading below their
intrinsic value, tend to outperform growth stocks during
inflationary periods, underpinned by solid earnings and cash
flow.
Interest rates are rising across the globe as central
banks battle rising prices, with even the Bank of Japan - which
long resisted monetary tightening - announcing policy tweaks
this week that would effectively allow long-term rates to rise.
As higher rates turn global investors' focus to value
stocks, the Japanese market "would be advantaged", Nakata said.
Japan's forward price-to-earnings ratio, which measures
share prices relative to expected earnings per share, stands
around 12 for the TOPIX 500 index .TOPX500 , lagging Wall
Street's benchmark S&P 500 index .SPX at about 17.
Nakata also said rising shareholder activism helped to make
the Japanese market more attractive, pushing companies to unwind
cross-shareholdings, reconsider their portfolios of business
activities, and boost board diversity.
Rising foreign interest in the Japanese market was evident
in November, when foreigners bought a net 1.287 trillion yen
($9.77 billion) of Japanese stocks, the highest in two years,
according to the Tokyo Stock Exchange.
Japan last saw aggressive buying by foreigners around 2013,
when hopes for former premier Shinzo Abe's "Abenomics" policy of
massive monetary and fiscal stimulus were at their peak.
Berkshire Hathaway Inc BRKa.N , run by the world's
best-known value investor Warren Buffett, also grabbed headlines
in November when it revealed it had raised its stakes in Japan's
five biggest trading houses to more than 6% each.
($1 = 131.7100 yen)
(Reporting by Makiko Yamazaki and Ritsuko Shimizu; Editing by
Edmund Klamann)
((Makiko.Yamazaki@thomsonreuters.com; +81-3-4563-2805;))