Japanese stocks rose on Monday as the yen fell to a three-month low on news that Prime Minister Shigeru Ishiba’s ruling coalition lost its parliamentary majority in Japan’s election. The ruling Liberal Democratic Party (LDP) and its coalition partner Komeito secured 215 of 465 seats, below the 233 seats needed to win power in Japan’s lower house. The results of this snap election indicate that Ishiba may face difficulties in passing his party’s policies through parliament. The Liberal Democrats may have to form a new coalition with a third party. The phenomenon creates uncertainty because “we may not know what this new government will look like, who the potential coalition partners are and what the coalition agreement will be,” said Izumi Devalier, chief Japan economist at Bank of America. told CNBC’s “Squawk Box Asia.” “I think it’s certainly not good for yen assets,” she added. Japan’s benchmark Nikkei 225 index closed up 1.82% on Monday, while the Topix gained 1.5%. Overall, the Nikkei 225 index, which includes the top 225 companies on the Tokyo Stock Exchange, is up about 15% since the beginning of the year, while the Topix is ​​up 11.7%. At the same time, the yen fell throughout early trading, falling to 153.885 against the U.S. dollar, its lowest level since the end of July. Neuberger Berman’s Kei Okamura believes the current rally is short-term as Japanese stocks have been “under pressure” over the “past eight or nine trading days.” “Given that the results we’re seeing… are not the worst-case scenario, then I think quite a few investors think this may not be as bad as people feared,” he told CNBC’s “Street Signs” Asia. Monday. Okamura, a senior vice president and portfolio manager at the investment management company, believes that in the medium to long term, there are still some uncertainties in Japan, and “the ruling coalition may have to launch some form of new policy with other parties.” measures that may have very ambiguous results in the future,” he said. Okamura added that these measures include “more fiscal stimulus” and lower tax rates. In the short term, he sees uncertainty around the yen’s current direction, largely due to the Bank of Japan’s “stable” stance and the possibility that the Federal Reserve will not cut interest rates at its upcoming meeting. “If you look at the mid- to long-term trajectory, our view is that the yen will appreciate given that the Fed will continue to cut interest rates and Japan may have to raise interest rates in the future,” Okamura said. His comments come as the Bank of Japan is expected to keep interest rates unchanged at its Oct. 31 meeting. Given the resilience of Japan’s domestic economy and the potential for yen appreciation, small and mid-cap stocks are the most attractive to him from a fundamental and valuation perspective. Still, he invests in “high-quality companies across the board” — including large-cap stocks. His top picks include Hitachi Group and Mitsubishi Logistics Group, insurance company Tokio Marine Holdings, hotel and golf course construction company Resorttrust and car auction company USS. Okamura described the stocks as “very high-quality companies that are market leaders in their respective fields.” The five are also among the largest shareholders in the 19.1 billion yen (124.6 million) Japan Equity Participating Fund. As of Oct. 28, the fund’s year-to-date return was 20.17%, slightly lower than its benchmark MSCI Japan Small Cap Index’s 21.09%. Talking about USS, he said that the company has more than 50% market share in the second-hand car auction field. This makes the company “the largest operator” in the industry in Japan, giving them “pricing power – which we think is absolutely critical,” he said. Okamura, meanwhile, described Tokyo Marine as “the kind of company that is likely to do well regardless of political uncertainty.” This is because the insurance company is currently growing its “profit and loss” and has good operations in Japan and the United States. “We expect the insurance company to continue to reduce its holdings and invest these earnings into the business, while also buying back shares basically. , which bodes well for balance sheet improvement,” he added.
Investing in Japan after the election? Professionals share their views | Real Time Headlines
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