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JAPAN'S SMALL BALL
JAPAN'S SMALL BALL: What Makes Investors Smaller Cap Fans
Springtime means baseball—the national pastime not only in the U.S. but also in Japan, where the season officially got underway on March 20. Japanese aces who have joined U.S. teams such as the New York Yankee’s Hideki Matsui and Seattle Mariner’s Ichiro Suzuki have gained fame as power hitters. Yet pro baseball in Japan tends to be a game of finesse where “small ball”—bunts, singles and doubles—dominates the play. Similarly, stock pickers in Japan say that while the country’s brand name auto and electronics exporters are well known overseas, it’s the unheralded Japanese smaller cap companies that can offer investors overlooked opportunities. Indeed, even as a strong yen is bruising many of Japan’s larger caps, Japanese small caps seem poised to improve their batting average thanks to some savvy squeeze plays, says Tad Fujimura, Head of Investment and Research at SPARX Asset Management Co. Ltd.
GREENER PASTURES
GREENER PASTURES: What U.S. Banks Can Learn From Asia
Slumping stock prices. Debt markets paralyzed by a credit crunch. An overextended banking system teetering on the brink of collapse. And plummeting property values. That may sound a bit like the sub-prime mess which has snared major commercial and investment banks in the U.S. But it actually describes the situation in Asia 10 years ago when markets from Bangkok to Tokyo cratered amid a crisis of confidence. The Asia of today looks much different from the cash poor and overleveraged region on the late 1990s. Asian corporates and financials seem to have learned their lessons and, as a result, are in much better shape than many of their counterparts in Europe and the U.S., says Tom Naughton, Chief Investment Officer of PMA Investment Advisors, Ltd., part of the SPARX Group.
JAPAN'S FREAKONOMICS
JAPAN'S FREAKONOMICS: How Policy Undermined the Economy
Are Japan’s wounds self-inflicted? That’s a matter of hot debate these days in Tokyo as the economy struggles to maintain momentum and the stock market zigzags. What’s clear is that a series of clumsy policy moves in recent months have done more to hamper the rate of growth in Japan than to stoke it. The term "kansei-fukyo," which means “government-made recession,” is now on the lips of many Japanese as the chief culprit in the kidnapping of a long anticipated domestic-led recovery. Critics say tough new regulations from mid-2007 on credit, housing and investment products, along with loose talk of tax hikes, quickly chilled Japanese consumer demand. That, in turn, has raised fears Japan might follow the U.S. into recession and see stock prices slump. But Tatsuo Yamamuro, a fund manager at SPARX Asset Management Ltd. in Tokyo, says those policy missteps' impact—bad as it was--has begun to fade and that current Japanese equity prices may present a buying opportunity.
STEALTH INFLATION
STEALTH INFLATION: What Higher Prices May Mean for Japan
A frog jumps into an old pond; the sound of water. That famous haiku by Japan’s most renowned medieval poet may be an apt metaphor for the Japanese economy in 2008. Much as the ripples in a frog’s wake stir up calm waters, Japan’s stagnant economy soon may be impacted by turbulence from a blip of inflationary pressure. On the surface, the Japanese economy still seems mired in the deflationary doldrums, but recent data show consumer prices have surged ahead at the fastest clip in nearly a decade. So far, that splash in the pond has done little to motivate investors in Japan's equity market. But Tatsuo Yamamuro, a fund manager at SPARX Asset Management Ltd. in Tokyo, says an inflationary jolt is exactly what’s needed to trigger a positive cycle of stickier prices, higher corporate profit margins and bigger paychecks that could ignite a long awaited recovery in Japanese consumer spending levels...
ASIA IN '08
ASIA IN '08: What to Look (Out) for in the New Year
As 2008 dawns, most Asian economies show few signs of slowing down, buoyed by the rapid ascendancy of China as a global economic power. At the same time, the U.S. economy appears to be losing momentum and the dollar is in a free fall against major world currencies. Despite some hiccups along the way, most Asian markets posted double-digit gains last year. As investors ponder whether that regional rally will continue, money managers are positioning themselves to take advantage of investment trends in Asia. Shun-hong Liu, Chief Investment Officer in charge of macro-economic strategy at Hong Kong-based PMA Investment Advisors Ltd., part of the SPARX Group Co. Ltd., has shares some of his insights about what he expects to unfold in the coming 12 months.
OFFICE LADIES' REVENGE
OFFICE LADIES' REVENGE: Why Japan's Glass Ceiling is Cracking
The secret to Japan’s success is often attributed to its hardworking "salaryman"-- the unheralded worker bee who routinely puts in 14-hour weekdays at the office and spends weekends on the golf course with clients. While that stereotype rings true when it comes to an obsession with overtime, a fierce sense of corporate loyalty and the ubiquitous dark suits, the term salaryman may be outdated in at least one key aspect—its gender. That's because after years of being relegated to menial roles within the conservative confines of Japan Inc., women are starting to fill more full-time positions, including managerial roles overseeing men. Credit Japan’s pressing labor crunch and a rapidly aging population for the shift, says Ayako Fukushima, an analyst at SPARX Asset Management Co., Ltd. in Tokyo.
MODERN ASIAN MYTHS
MODERN ASIAN MYTHS: How Perceptions Diverge From Reality
For first-time travelers to Asia, debunking common myths about the region is one of the most eye-opening experiences. For example, chopsticks may be standard tableware in north Asia, but they are rarely used in Southeast Asia (with the notable exception of Vietnam.) Similarly, misconceptions about Asian economies also abound. For example, while much of Asia is classified as “emerging,” today Hong Kong has a higher per capita income than Britain. What’s more, many people forget that Japan—not China—is still the world’s second largest economy. When it comes to investing in Asia, it can be even more complicated separating fact from fiction. Much has changed since an Asia-wide financial crisis 10 years ago, but investors’ caution may rest on outdated assumptions about the region. “The perception about Asian markets is often different than the reality,” says Tom Naughton, Chief Investment Officer of PMA Investment Advisors Limited, part of the SPARX Group. “Some misperceptions were once true but are no longer so and others were never true but somehow became conventional wisdom.”
SHIFT_JAPAN
SHIFT_JAPAN:Is Japan Revved for Its Third Gear?
Japanese equity markets have undergone turbulence in recent weeks
due partly to fallout from the sub-prime mortgage issue in the U.S., but also from persistently weak price data, currency market volatility and political instability. So far, Japan’s economic recovery has been led by the twin engines of capital spending and exports, but market watchers are closely parsing consumer spending data. They're looking for signs of a long awaited pick-up in domestic demand as a third gear to shift into faster growth. How likely is it that Japan will make the transition? And what are some of the signposts to look for? Shuhei Abe, Chief Investment Officer at SPARX Asset Management Co., Ltd. responds to these and other questions, such as the fate of shareholder activism in Japan and the outlook for the country’s political leadership...
SMALL SMARTS
Can Japan's Small Caps Stand Tall Again?
Japanese small cap stocks were the toast of Tokyo in 2005, when the major stock indices tracking smaller companies’ equity soared on expectations for higher profit growth. But since early last year, share prices of small cap stocks in Japan have taken a nosedive—falling faster, and farther, than Japanese large caps or even mid caps. The immediate trigger for the collapse in early 2006 came from concerns about accounting standards at smaller firms. Yet smaller companies’ share prices have continued to sink due to a number of other more fundamentals-oriented factors. But Tadahiro Fujimura, Head of Investment Research at SPARX Asset Management Co. in Tokyo, says the worst may be over for Japan’s hard hit smaller stocks...
ASIAN DYNAMO?
ASIAN DYNAMO: Why Asia Inc. May be Stronger Than Ever
Asian markets have long been known to catch a cold when U.S. markets sneeze. Coupled with local business cycles that can zig when the U.S. zags, the potential for volatility has dissuaded some investors from wading into Asia. But while the U.S. remains a key export market for Asian exporters, some equity experts say surging levels of intra-regional trade in recent years may better insulate the region from external shocks—like a downturn in demand from the U.S. More broadly, the risk environment in Asia overall appears to have evolved significantly over the past decade. Thomas Naughton, Chief Investment Officer for Equity at PMA Investment Advisors Ltd. in Hong Kong, says that could result in lower levels of correlation with other major markets--such as the U.S.--over the long-term...
SEOUL STIRRING
What's Behind a Rally in Korean Stocks?
In the dockyards of Ulsan and Geoje along the southeastern knob of the Korean peninsula, the grind and hiss of heavy-duty cranes and arc-welding torches is deafening. That industrial symphony is testimony to the soaring demand for oceangoing freighters from the world’s biggest shipbuilding nation. Korea’s shipbuilding, industrial engineering and steel sectors have all undergone something of a renaissance as orders have piled up from the four corners of the world. Strong earnings at these cash rich “old economy” companies have helped spark a rally in Korean stocks—up some 33% so far this year—that has surprised many foreign investors who have kept to the sidelines. While risks associated with a “Korea Discount” in recent years haven’t entirely dissipated, Min Soo Kim, a portfolio manager at PMA Investment Advisors Ltd., part of SPARX Group., says the Seoul market—with one of the lowest price-earnings ratios in Asia--may be poised for continued gains in the months ahead...
CHINA'S COATTAILS
What's Good for China May Be Good for Asia
China’s rise as an economic power has been swift, but its stock market's ascendancy into the major leagues has been even more rapid. While just a handful of mainland Chinese companies topped $500 million in market cap ten years ago, hundreds easily clear that hurdle today. China-based banks, for example, which teetered on the edge of insolvency in the late 1990s, now boast a combined market capitalization north of $500 billion. No wonder Chinese equity, including so-called H shares traded in Hong Kong, has leapfrogged other markets in recent years to become a leading component of Asia ex-Japan stock indexes. Investment pros say China’s not the only game in town--stock markets in Australia, Hong Kong, Indonesia and South Korea all surged to record levels in May. But they caution not all Asian markets are equally poised for gains in the months ahead…
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