While the Japanese stock market suffered significant falls and selling by investors following the earthquake and tsunami which hit the country on 11 March, fund managers say now could be a good time to invest in some companies.
The magnitude 9 Tohoku earthquake, subsequent tsunami and nuclear crisis has rocked the Japanese economy and financial markets, with many Japan investment funds seeing sharp falls in their performance.
However, a v-shaped recovery is possible, according to manager of the Schroder Tokyo Fund, Andrew Rose, with this partly driven by government-backed ‘rebuilding and official stimulus’.
Rose has predicted that the ‘broader impact [to the economy] hinges on the duration of the power disruption’, while the national crisis has ‘created cohesion and focus’ with the authorities, prompting a swift policy response.
In what he described as ‘indiscriminate selling’ of shares by some investors opportunities have opened up for value investors with the share price of some companies now offering good value, Rose said.
The Asian team at the asset manager JP Morgan said earlier last week that given the uncertainty ‘we are not expecting the market to stage a sustainable rally in the short-term.’
Despite this the team said they were starting to observe ‘some compelling value offered by high-quality global blue chip companies’ caused by a ‘savage decline in the market’.
A shift by many large Japanese companies to invest in overseas markets is also expected to prove beneficial for some firms as they are less reliant on strong domestic demand.
In a report including analysis following the Tohuku earthquake, the World Bank said Japan’s real GDP (gross domestic product) growth would slow but the slowdown was ‘likely to be temporary’ with growth expected to pick up after mid-2011 once reconstruction efforts got underway; although the organisation did add that it was ‘too early for a full assessment’.
The key concern for Japan in the wake of the earthquake has been containing explosions at the Fukushima nuclear plant. Reports on 21 March suggested that the restoration of power to some of the reactors’ cooling systems was helping efforts to contain the situation.
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