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Japan fund managers respond positively to government proposals

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The vast majority of fund managers in the Japan sector are positive about the changes proposed by the new DJP government in Japan, according to Standard & Poor’s Fund Services.

Fund managers have been impressed by the DJP’s policies, including incentives to promote childbirth, revitalise long-term care, abolish age discrimination in healthcare, and support the domestic economy.

“Many fund managers feel that the new government’s policies are going to take some time to come through, and this is causing some ‘noise’ in the market,” says Guy Boden, lead analyst at S&P Fund Services.

Examples include Ken Nishizawa and his team at Melchior Japan Opportunities Fund, who told S&P Fund Services that the benefits from the new government will come in the medium to long term. However, the Melchior team took advantage of the short term change in sentiment by selling out of a number of healthcare stocks that had done well before the election.

Lesley Kaye at GAM says she has moved the portfolio into domestic plays to benefit in the medium term from the shift of the government to supporting the domestic economy, and Scott McGlashan and Ruth Nash at J O Hambro are similarly positive on these proposed changes.

Meanwhile, Yutaka Uda at Sturdza Nippon Growth Fund has been investing in companies likely to benefit from the new government’s commitment to reducing greenhouse gas emissions.

However, notes of caution were sounded. GAM’s Kaye told S&P Fund Services she was disappointed that stock market reaction was not more positive to the election result. McGlashan and Nash stated that the proof of the government will be in the delivery of their proposed policies, and Martin Wood at Henderson said that more details of the policies need to come out in the coming months.

Despite this, Boden says that the sentiment is generally positive: “Most managers are positive on the outlook for Japanese equities citing low P/B ratios and the benefit of strong growth rates in the Asian region compared to the US and Europe.”

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