Strong equity performance supported by improving fundamentals:
Japanese equities rallied sharply in April, underpinned by resilient corporate earnings, strength in US technology stocks, and easing geopolitical concerns. While broader macro sentiment has softened somewhat, underlying corporate fundamentals remain robust, supporting the market’s upward trajectory despite intermittent volatility.
Mixed macro signals but resilient economic backdrop:
Business sentiment has shown early signs of caution amid geopolitical uncertainty and rising energy prices, although overall economic conditions remain stable. Policy support, improving real wages, and continued corporate reform provide a supportive backdrop, while the Bank of Japan is gradually shifting towards a more hawkish stance.
Constructive medium- to long-term outlook supported by structural change:
We maintain a constructive view on Japanese equities as they transition into a structural long-term investment opportunity, supported by inflation normalisation and corporate transformation. Despite near-term geopolitical risks, earnings growth led by sectors such as electrical equipment, nonferrous metals and chemicals is expected to remain solid, with continued opportunities emerging through bottom-up stock selection.
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Written by Kazuhiko Hosaka, Senior Product Specialist, Asset Management One Co., Ltd