You Can Still Profit from Japan

[ETF Daily News]( January 10th, 2024 [You Can Still Profit from Japan]( Japan’s poor economic performance since the late 1980s has gone hand-in-glove with an even lousier stock market. However, the 2023 recovery of the Nikkei and Topix indices to levels not seen since the start of the 1990s showed that global investors have finally begun to take the country seriously again as an investment destination. The Topix index is a blended measure of the Japanese stock markets (Japan still maintains large regional exchanges). It soared by roughly 26% in 2023 to outperform the S&P 500 in local currency terms. The S&P 500 is still ahead in dollar terms—which, according to Goldman Sachs analysts, explains why some dollar-denominated investors have been reluctant to increase their exposure to Japan. But that hasn’t stopped other global investors from buying up Japanese stocks. Why Japanese Stocks Are Enjoying a Renaissance Valuations are cheap in Japan and investors are discovering that Japan has a lot of high-quality technology and manufacturing firms, particularly in the semiconductor sector. For example, Advantest (ATEYY) is a leading manufacturer of automatic test equipment for the semiconductor industry. Its stock is up more than 100% over the past year. The reshaping of global supply chains away from China is another plus. This could unleash a wave of foreign acquisitions of Japanese manufacturers and facilities. At the least, it is igniting interest in those companies and stocks. In addition, authorities at the Tokyo Stock Exchange (TSE) have also been pushing hard on Japan’s many capital-inefficient companies, whose price to book (P/B) ratio is below 1. They must either shape up or face financial penalties. Keep in mind that, at the time the TSE began its push early in 2023, more than half of all TSE stocks were trading below their book value. The reason was that there was often too high a reserve of cash. And even though the penalties are years away, companies are already starting to follow the new script. Buyback announcements hit an all-time record, and cash dividend payouts from the aforementioned cash piles are also at a record. In simple terms, these TSE reforms are having a big impact by changing cultural expectations (becoming more shareholder friendly) of Japanese corporate management. One other structural change that seems to be boosting competition in corporate Japan—and thereby the productivity of companies themselves—is the unwinding of crossholdings. Crossholdings between companies has been one of the main criticisms of Japan’s market for decades. But now, Goldman Sachs research shows that crossholdings have reached a low of about 10% of the book value of all companies on the stock exchange. And, more reforms are on the way in Japan… Continue reading at [INVESTORSALLEY.com]( NOTE: If URLs do not appear as live links in your e-mail program, please cut and paste the full URL into the location or address field of your browser. [Privacy Policy]( | [Terms & Conditions]( This email contains a paid advertisement.This is not a solicitation for the purchase or sale of securities. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice, prior to making any investment decision. Advertisements and sponsorships are provided as a service to Stock News users. Stock News is not responsible for their content, services or products. The statements and opinions contained in this advertisement are not those of Stock News, and Stock News disclaims any liability for or arising from such statements and opinions. You are hereby advised that Stock News is receiving a fee as compensation for the distribution of this advertisement. [Click here to unsubscribe]( Copyright © 2024 ETF Daily News, part of StockNews.com - POWR Stock Rating, Market Outlook & Investment Insights Magnifi Communities, 1 Penn Plaza, Suite 3910, New York, NY 10019