JAPAN - The Japanese equity market is likely to outperform its Chinese counterpart in 2005, according to Baring Asset Management (BAM).
Joji Maki, head of Japanese equities at BAM in Tokyo, commented: “We predict that markets will rally in the region in 2005 and we expect the Bank of Japan to keep monetary policy loose to facilitate the anticipated recovery.
“There are two big developments for 2005 which are likely to be positive for the Japanese market. Firstly, the Topix index will begin its move to a floating base at the end of October 2005, which will result in increased transparency and market efficiency.
“Secondly, changes are taking place which will make it easier for companies to engage in M&A activity, including allowing Japanese companies to be bought by foreign firms.”
BAM predicts positive performance from Asian markets in general, part due to a build up of surplus savings in Asia – compared to the debt and deficits of the developed countries – which the firm believes will have an impact on global economies and markets going forward.
The firm believes Japanese recruitment companies are a good bet for 2005, as the country’s ageing population means companies face “considerable problems” from 2006/2007 when many workers head into retirement.
Maki added: “The Japanese economy is now in a cyclical slowdown phase, but we believe the trough of the cycle will not be as low as in previous ones. Deflation is improving and we should start to see positive price inflation in Japan in 2006.”
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