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Japan's Nikkei Momentum: A Wallstreet Comeback Story

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Bullish on Japan, India, Vietnam Stocks, Eastspring Investments Says

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Bloomberg Dec 9, 2023 03:14 · 8921 Views

Ken Wong, Asian equity portfolio specialist at Eastspring Investments, shares his views on stocks in Japan, Indian, Vietnam and China. He speaks with Vonnie Quinn on "Bloomberg Daybreak: Asia."

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Transcript

  • 00:00 Obviously, it's a conviction buy for you still.
  • 00:02 I mean I guess
  • 00:04 my question is even after today when we're seeing the yen at 1:44 in change
  • 00:09 and we've had a nice run up almost 25% for the Nikkei 225
  • 00:13 this year.
  • 00:14 Yeah, the fact is, is that we think that with normalization of interest rates and yield curves
  • 00:18 within Japan, we think that this is actually going to be
  • 00:21 a positive for Japan.
  • 00:22 The fact is that if the POJ is actually doing this or is actually contemplating doing this,
  • 00:28 that means that you know, inflation
  • 00:30 and slight rise in inflation is sustainable.
  • 00:33 The fact potentially is in their views that maybe the economy despite what we saw in terms of the GDP reading
  • 00:38 today that it is on a gradual path of you know modest growth in Japan that should bring positives to Japanese corporates.
  • 00:46 You know from our point of view, we feel that you know with Japanese corporates seeing
  • 00:51 a normalization of interest rates potentially you might see them increase overall capital expenditures.
  • 00:56 We could potentially continue to see
  • 00:58 further wage growth and then also at the same time seeing improvements in overall EPS growth as well for Japan, which is what a lot of investors are looking for.
  • 01:07 So that's why even in 2024 we still do see a lot of positives going.
  • 01:11 And in particular, if a lot of the Japanese corporates continue to do their, you know, share buybacks, improve on overall corporate governance,
  • 01:18 increasing dividend payouts, these will continue to be benefits for Japanese investors.
  • 01:24 Explain why an exit from negative interest rate policy would be helpful to corporates.
  • 01:30 It's more of a sentiment, it's more specifically you know, when interest rates are a bit more normalized.
  • 01:35 And the fact is you have to remember that a lot of Japanese corporates balance sheets are very strong.
  • 01:40 The fact is, is that you know while interest rates
  • 01:43 are normalizing, it's more of a sentiment, it's more signs that there's an overall structural improvement within the Japanese economy which would actually enable for a lot of Japanese companies really to increase capital expenditures.
  • 01:56 And that's really where we see the benefits
  • 01:58 are actually taking place when it comes to normalizing interest rates.
  • 02:02 Well, I want to move to India as well because India is another one of your conviction picks or has been are are these staying conviction picks for the year for into 2024.
  • 02:12 And obviously we we've seen, you know not quite the same run up in India up 15%, but we've
  • 02:16 had those regional elections now, you
  • 02:19 know
  • 02:19 looking like
  • 02:20 it could be good for Modi.
  • 02:22 Would that make you more bullish on India at least stocks wise?
  • 02:26 Yeah, I mean we remain bullish.
  • 02:27 I mean the fact is, is that look like what you mentioned earlier that you know this week we saw you know, fairly nice gains within the Indian equity markets.
  • 02:35 You know what the regional elections we've got, you know the main elections coming up next quarter.
  • 02:39 And so specifically, you know, that should actually have a continued boost because the fact is, is that all expectations are still for Modi to continue to be
  • 02:46 Prime Minister again.
  • 02:48 But more importantly, you know what we're seeing on the ground in particular within India is that when you look at some of the structural changes, when you look at some of the positives around, you know, whether it be the financials,
  • 02:58 whether it be it, you know, increased sentiment towards real estate, you know, there's a lot to really focus on when we comes to Indian equities.
  • 03:05 Yes.
  • 03:06 The fact is, is that valuations continue to be you know quite extensive and quite expensive when you look at Indian equity markets.
  • 03:12 But when you factor in the fact that overall economic growth remains strong,
  • 03:16 EPS growth remains strong and more importantly domestic investor in sentiment and their overall allocations and investments back into the Indian equity markets especially over the past couple of years,
  • 03:28 you know signals that you have a very strong domestic investor base who will continue to invest in the Indian stock market regardless of whether or not you have foreign investors coming in or not.
  • 03:39 Now just to mention that
  • 03:40 in Asia, Vietnam is your third conviction pick.
  • 03:43 But I wanted to ask, you know, going into this here, we didn't necessarily see what was coming, right.
  • 03:48 And I wonder if
  • 03:49 investors are a little now,
  • 03:52 you know, wanting to see returns
  • 03:54 immediately and if they don't see them, they'll head for the exits.
  • 03:58 That happened in China several times this year and obviously you know,
  • 04:02 the China story didn't quite play out.
  • 04:05 Are you as pessimistic on China for 2024?
  • 04:08 And and what about this question of investors being sort of
  • 04:11 now or never.
  • 04:13 No, The thing is, is that we're trying we remain to be cautiously optimistic.
  • 04:16 I mean we're we have a neutral position right now in China.
  • 04:19 More importantly it's about this overall sentiment and whether or not we can continue to see you know further policy support right now because of uncertainty around how policy support potentially could
  • 04:30 affect specific sectors.
  • 04:31 We think that bottom up stock picking is actually going to be much more important in 2024 when it comes to trying to outperform within the China market.
  • 04:40 And like what you mentioned with Vietnam, the one thing we, you know we want to consider essentially is if they could come up for
  • 04:46 maybe inclusion into emerging markets, not maybe next year but maybe in 2025.
  • 04:51 We tend to see run UPS in the stock market when there are specific frontier markets that are potentially in consideration for.
  • 05:00 Move up into emerging markets.
  • 05:01 So you know, these are specifically some of the, you know, strategies in some of the areas we're looking for opportunities in 2024.