GLOBAL - The Japanese equities market must be treated with caution until the US economy has recovered fully, fund managers warn.
The move flies in the face of latest indicators which suggest Japan’s economy might be on the brink of recovery.
UK’s Chiswell Associates’ Kevin Bennett points out that although there are signs of a recovery, Japan’s economy relies heavily on exports – especially to the US – and the strength of the dollar against the yen.
He said: “But the US market remains weak and the yen is strengthening, so Japanese exports are not a very attractive proposition at the moment. This does not bode well for the market.”
He added that any economic growth in the Japanese economy would be “derailed” if US markets fell.
State Street Global Advisors senior global strategist Stephen Burke agreed that the Japanese economy will have little, if any, sustainability if the US economy stumbles.
“This year, the Japanese equities markets have been one of the few safe places to hide throughout the developed markets, not because of compelling fundamentals, but as the result of US market turmoil.”
He added: “With 35% of Japanese auto exports headed for the US, a rising yen and a faltering US economy would certainly put a swift end to the industry’s robust sales of late.”
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