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Tags: gluskin sheff | david rosenberg | japan | stock market | investors

David Rosenberg: Japan 'Most Under-Owned Stock Market on the Planet'

By    |   Monday, 30 October 2017 10:48 AM EDT

Veteran market guru David Rosenberg advises savvy investors to look on the other side of the world for today’s best investment opportunity.

"The one part of the world which looks very good to me right now, a great turnaround story that's under-owned, is Japan. The Nikkei is breaking out," Gluskin Sheff's chief economist and strategist told CNBC.

"Japan is probably the most under-owned stock market on the planet from a global portfolio manager perspective," the economist added. "I think even a child could see that the 30-year secular downtrend has been broken over the course of the past couple of months," he said.

Rosenberg said Japan has one of the few markets that isn't trading expensively to its historical price earnings ratio — noting "almost everybody else in the world is."

He doesn’t overly fear North Korea missile threat against Japan.

"What's interesting in Japan is that the small cap stocks are starting to outperform large cap stocks. So, what that's telling me is that this is more than just buy Japan because of the weak yen. This is actually a much more fundamental story that people are missing," Rosenberg said.

Japanese stocks have risen since Prime Minister Abe easily won in national elections.

Investors assumed Abe’s victory would allow the Bank of Japan to continue with massive monetary easing that depresses bond yields and the yen, even as the U.S. Federal Reserve seems determined to hike rates again in December, Reuters reported.

“This should extend the lifespan of ‘Abenomics’, including the BOJ’s mega stimulus,” wrote analysts at the Blackrock Investment Institute.

“We see the outcome as a mild positive for Japanese equities, and as a mild negative for the yen and Japanese government bonds.”

Bain Capital is planning on further ramping up its dealmaking in Japan after it came out on top in the recent battle to purchase Toshiba’s semiconductors arm and as it bids to buy out Japan’s third-largest advertising agency, Asatsu-DK (ADK), Reuters reported. 

In making further acquisitions, the Boston-based Bain would cement its position as one of the most active private equity firms in Japan and help to break down a corporate culture that has been mostly hostile to foreign investors.

“Japan is a hard market. It takes years to build teams, relationships, credibility,” said David Gross-Loh, who is Bain’s co-head of Asia and is in charge of its business in Japan, in an interview. “I wouldn’t be surprised that five years from now we’ll have twice as many deals as we do now.”

Japan’s private equity market is small relative to its economy, the world’s third largest. This year, though, the Toshiba acquisition has pushed private equity-backed deals in Japan to a record $22 billion - more than double 2016’s $8 billion, according to Thomson Reuters data.

From 2007 to 2016, some 30-40 buyout deals on average were struck annually with slightly fewer exits each year, according to data provider Preqin. And both deals and exits have been worth a fraction of those done in China every year.

Yet this year has seen a pick up in interest, industry sources say, in part thanks to significant volumes of cash raised in 2016 as funds look to Japan. They are hoping to cash in on demographic shifts -- such as the nation’s aging population - changes in corporate governance standards and a more active initial public offering market allowing for future exits.

(Newsmax wires services contributed to this report).

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Veteran market watcher David Rosenberg advises savvy investors to look on the other side of the world for today's best investment opportunity.
gluskin sheff, david rosenberg, japan, stock market, investors
Monday, 30 October 2017 10:48 AM
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