Region

The Asia Pacific region covers a vast area and comprises many countries as diverse and complex as they are vibrant. The economies of the Asia Pacific have experienced rapid growth in the past few decades and increasingly influence investment decisions around the globe. No country has made greater investments or is as deeply involved in Asia as Japan.

Japan is the world’s third largest economy and an integral part of the global economy and its fortunes affect us all.

The often tumultuous events of the late 1990s have forced many changes in Japan that we strongly believe will deliver positive returns for investors in Japanese equities.

The importance to investors of taking the right investment stance on Japan cannot be overstated. It is not a market that rewards amateurs or casual investors. Sound investment requires a strong understanding of Japan’s economic and market structures and an ability to fathom the changes in attitude that will determine who wins and who loses in the new environment.

It scarcely needs repeating that Japan has had a thoroughly testing time since the asset inflation “bubble” burst at the end of the 1980s. The benchmark Topix index remains far below the level it reached in December 1989 – despite the passage of over twenty years. No other country in the modern era has experienced asset and price deflation of this magnitude and duration, but the adjustments to this unprecedented wealth destruction – although incomplete – are well under way.

As this process of profits recovery and balance sheet repair accelerates, we are confident that we will find investments in Japan that are highly attractive in an international setting. Optimal’s excellent record in stock-picking affords investors the chance to benefit from the rehabilitation of Japanese equities and to generate a return in excess of the broader market.

Approximately 60% of the world’s population is located in Asia. This, coupled with robust economic growth, makes the Asian region increasingly important within the global economy. The developing capital markets in Asia will assist the growth of the private sector and this will create opportunities for investors. Japan sends well over half of its exports to Asia and has also built a strong and extensive network of Asian subsidiaries that generate revenues even greater than the value of Japan’s exports to the region. Investors in Japanese companies find an increasing number of ways to capitalise on the rising wealth of Asia.

Optimal has been managing Japanese and Asian equity portfolios since 1999. The investment team has been visiting Asia over many years, attending company meetings and building up an extensive knowledge base which helps us in our Japanese investment research.