UBS Says Buy Japan Stocks on Dips; Topix May Gain 15% by Yr-End
2014-06-16 01:48:37.176 GMT
By Jennifer Tan
June 16 (Bloomberg) -- Nikkei 225 Index fairly valued, to
remain range-bound with limited upside in near term; investors
should buy on dips at ~14,000 and sell into strength at
15,000-15,500, until Bank of Japan unveils further monetary
policy easing, Toru Ibayashi, Head of Japan Equities at UBS
Wealth Management, says in interview.
* Nikkei 225 seen peaking at 17,000 in 2H; expect 15% upside
for Topix by end-2014 in best-case scenario
* UBS remains neutral on Japan stks, after cutting from
overweight in late 2013; mkt now trading at ~13.8x forward
PE vs historical PEs of 23x-24x
* BOJ likely to ease further in July-Oct. by increasing
purchases in JGBs, ETFs and J-REITs; govt will also decide
in Oct.-Nov. whether to raise VAT to 10% from 8%, and if
parliament approves another VAT increase, expect higher
public investment and further monetary loosening, which
should boost equities
* Weaker yen trend to continue: UBS sees USD/JPY at 103 by
end-2014, and at 105 in 12 mos.; key is widening of yield
gap between U.S. and Japan
* Key sector picks:
* Japan exporters
* Automakers, machinery and specialty chemical cos.,
are best-positioned to take advantage of weaker yen,
global economic recovery
* Exporters also trading at discount of ~12.5x PE vs
avg mkt PE of ~14x, are likely to post higher EPS
growth this yr and next yr
* 2013 “losers” may become “winners” this yr; most
have reported sluggish results and carried out major
business restructuring
* J-REITs
* They offer attractive 3.5%-4.5% annual yields, are
well-positioned to take advantage of lower office
vacancy rates and higher monthly rents from mid-yr
* Govt Pension Investment Fund (~$1.27t AUM) will also
start investing in J-REITs, while BOJ is expected to
buy more J-REITs at next policy meeting
* Stks tied to China’s economy
* Japanese steelmakers underperformed Nikkei last yr
due to China’s slowing economy and are oversold
* While there aren’t clear signs of recovery in
China’s steel industry yet, Japanese steel cos. will
benefit from lower iron ore prices and the industry
rebound may not be too far away
* While there aren’t clear signs of recovery in
China’s steel industry yet, Japanese steel cos. will
benefit from lower iron ore prices and the industry
rebound may not be too far away</li></ul></li></ul>
Related stories:
* Abe Plans Company Tax Cut in 2015 as Kuroda Warns on Budget
* Tokyo May Office Vacancies 6.52%, Lower Than a Month Earlier
* LDP Yamamoto: BOJ Needs Easing Even After Reaching Goal:
Reuters
* BOJ Sticks With Easing as Analysts Delay Extra Action Calls
* Abe Predecessor Warns of Market Turmoil If Sales Tax Not
Raised
* Japan Stocks Offer Low Returns, Poor Earnings Growth:
Templeton
For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>
To contact the reporter on this story:
Jennifer Tan in Singapore at +65-6212-1114 or
jennifertan@bloomberg.net
To contact the editors responsible for this story:
Jan Dahinten at +65-6212-1164 or
jdahinten@bloomberg.net
2014-06-16 01:48:37.176 GMT
By Jennifer Tan
June 16 (Bloomberg) -- Nikkei 225 Index fairly valued, to
remain range-bound with limited upside in near term; investors
should buy on dips at ~14,000 and sell into strength at
15,000-15,500, until Bank of Japan unveils further monetary
policy easing, Toru Ibayashi, Head of Japan Equities at UBS
Wealth Management, says in interview.
* Nikkei 225 seen peaking at 17,000 in 2H; expect 15% upside
for Topix by end-2014 in best-case scenario
* UBS remains neutral on Japan stks, after cutting from
overweight in late 2013; mkt now trading at ~13.8x forward
PE vs historical PEs of 23x-24x
* BOJ likely to ease further in July-Oct. by increasing
purchases in JGBs, ETFs and J-REITs; govt will also decide
in Oct.-Nov. whether to raise VAT to 10% from 8%, and if
parliament approves another VAT increase, expect higher
public investment and further monetary loosening, which
should boost equities
* Weaker yen trend to continue: UBS sees USD/JPY at 103 by
end-2014, and at 105 in 12 mos.; key is widening of yield
gap between U.S. and Japan
* Key sector picks:
* Japan exporters
* Automakers, machinery and specialty chemical cos.,
are best-positioned to take advantage of weaker yen,
global economic recovery
* Exporters also trading at discount of ~12.5x PE vs
avg mkt PE of ~14x, are likely to post higher EPS
growth this yr and next yr
* 2013 “losers” may become “winners” this yr; most
have reported sluggish results and carried out major
business restructuring
* J-REITs
* They offer attractive 3.5%-4.5% annual yields, are
well-positioned to take advantage of lower office
vacancy rates and higher monthly rents from mid-yr
* Govt Pension Investment Fund (~$1.27t AUM) will also
start investing in J-REITs, while BOJ is expected to
buy more J-REITs at next policy meeting
* Stks tied to China’s economy
* Japanese steelmakers underperformed Nikkei last yr
due to China’s slowing economy and are oversold
* While there aren’t clear signs of recovery in
China’s steel industry yet, Japanese steel cos. will
benefit from lower iron ore prices and the industry
rebound may not be too far away
* While there aren’t clear signs of recovery in
China’s steel industry yet, Japanese steel cos. will
benefit from lower iron ore prices and the industry
rebound may not be too far away</li></ul></li></ul>
Related stories:
* Abe Plans Company Tax Cut in 2015 as Kuroda Warns on Budget
* Tokyo May Office Vacancies 6.52%, Lower Than a Month Earlier
* LDP Yamamoto: BOJ Needs Easing Even After Reaching Goal:
Reuters
* BOJ Sticks With Easing as Analysts Delay Extra Action Calls
* Abe Predecessor Warns of Market Turmoil If Sales Tax Not
Raised
* Japan Stocks Offer Low Returns, Poor Earnings Growth:
Templeton
For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>
To contact the reporter on this story:
Jennifer Tan in Singapore at +65-6212-1114 or
jennifertan@bloomberg.net
To contact the editors responsible for this story:
Jan Dahinten at +65-6212-1164 or
jdahinten@bloomberg.net