Remain positive on Topix despite recent weakness

In breve

The Topix had a strong start into the year, outperforming both the S&P500 and the MSCI EMU. Since March 17th this strong performance slowed down, in part due to a pause in the rotation into Value and Cyclicals which had negative spillovers into Topix.

Highlights:

  • The good YTD Topix performance has recently been halted. In part this is due to a higher risk aversion and pause in rotation into Value and Cyclical sectors.
  • This pause is also due to the BoJ’s affirmation of its yield curve control (YCC) policy which will maintain the 10-year yield at bay, representing a limiting factor for Japanese banks and Value-Cyclical sectors in general.
  • Finally, by the end of the month, firms will release dividends, but retailers are anticipating capital gains realisation in order to maximise tax advantages.
  • Such issues may eventually prolong the weakness, but we think the Topix rally still has legs. The Value-Cyclical rotation is advanced but not exhausted yet and the BoJ in the end aims to ensure a complete reflation of the economy before letting yields rise. It will also start buying Topix ETF
    instead of Nikkei ones.
  • A further rise in US yields, a still strong GDP momentum and higher inflation expectations represent a positive mix for a Value-Cyclical index as the Topix.
  • Valuations are still attractive in relative terms and our proprietary country score based on expected earnings growth (among other valuation measures) still places Japan as one of the best globally.
  • In sum, we recommend maintaining an overweight position on the Topix..

Download the full publication below

Remain positive on Topix despite recent weakness
Picture

© Generali Investments, tutti i diritti riservati. Questo sito web è fornito da Generali Investments ed è considerato come una comunicazione di marketing e una promozione finanziaria riferita ai prodotti e servizi delle società elencate di seguito, appartenenti al Gruppo Generali: Generali Asset Management S.p.A. Società di gestione del risparmio & Generali Investments Luxembourg S.A. (nel prosieguo, congiuntamente indicate come Generali Investments). Inoltre, il sito può contenere comunicazioni di marketing e promozioni finanziarie di prodotti e servizi di società appartenenti alla piattaforma coordinata da Generali Asset Management S.p.A. Società di gestione del risparmio, nello specifico di Infranity, Sycomore Asset Management, Aperture Investors LLC., Plenisfer Investments SGR, Lumyna Investments, Sosteneo Infrastructure Partners SGR e Generali Real Estate S.p.A. Società di Gestione del Risparmio