Reuters Summit: Fidelity International sees more upside in Tokyo shares: Japan equity head
08/11/2019 04:07
(For other news from the Reuters Global Investment Outlook
2020 Summit, click https://www.reuters.com/summit/investment20)
By Tomo Uetake and Hideyuki Sano
TOKYO, Nov 8 (Reuters) - Fidelity International sees further
gains in Japanese stocks next year and has started to invest in
some value shares selectively, such as some automakers, the
asset manager's Tokyo-based investment chief Takashi Maruyama
told Reuters.
There some early signs of bottoming out in the manufacturing
sector's corporate earnings although he is a little wary about
further upside in some chip-related shares, Maruyama, head of
equities at Fidelity International (FIL) Japan, said late on
Thursday at a Reuters Global Investment Outlook 2020 Summit.
He said many manufacturers had cut their full-year profit
forecasts, but year-on-year falls in profits are slowing and
leading investors to think the worst period could be behind
them.
"Over the past weeks, we have noticed some early signs that
suggest corporate earnings won't get any worse, initially in
semiconductor-related companies, then electronic parts makers
and most recently, in factory automation-related firms."
Maruyama cited Misumi Group 9962.T , one of the fund
manager's top picks for years, as an example. The Japanese
factory automation equipment maker slashed its profit estimates
for the business year to March. urn:newsml:reuters.com:*:nXB19WMX9W
But Misumi stocks jumped nearly 10% in less than two weeks
since the earnings announcement, because investors have focused
on the fact that year-on-year decline in earnings stopped
worsening in October-March.
Some shares, notably semiconductor-related firms, have
already rallied substantially to such an extent, however, that
Fidelity could rotate out of those expensive shares, Maruyama
added, although he did not name the companies he recently sold
and may reduce.
The big question for 2020, Maruyama added, is whether the
global economic recovery will become strong enough to prompt
investors to snatch up value shares - namely financials and car
makers - which have long been shunned by many investors. Value
stocks are those that trade relatively cheaply versus their
fundamentals.
"We have already started buying some of the value stocks
selectively. No financial names yet but some auto stocks," the
head of Japanese equities unveiled, adding that buying into
value companies remains a divisive subject in his investment
team.
"In order to get a sustained rally in long-lagging financial
stocks, fiscal stimulus will be needed in addition to some
stability in global growth, with the 10-year Treasury note yield
moving back above 2%."
The U.S. 10-year yield had hovered below the 2% mark since
early August and stood at 1.8% US10YT=RR in late Asian trade
on Thursday.
Fidelity International has become overweight on Japanese
stocks this month on an anticipated pick-up in corporate
earnings and relatively inexpensive valuations compared with
international peers.
Maruyama expects the benchmark Nikkei's .N225 core range
for 2020 to be 21,500 to 24,500 and the index could rise as high
as 25,000. The Nikkei closed at 23,330, its highest in 13
months, on Thursday.
"When the Nikkei nears 25,000, we will take it as an
opportunity to take profits. We don't expect the market will
rise continuously."
Maruyama manages the asset manager's 1.56 trillion yen
($14.3 billion) Japan equity portfolios as of end-September.
For more summit stories: [https://www.reuters.com/summit/investment20
]
($1 = 109.00 yen)
(Reporting by Tomo Uetake & Hideyuki Sano; Editing by
Jacqueline Wong)
((tomo.uetake@thomsonreuters.com; +81 3 4563 2795))