Legg Mason’s Shiozumi – Japan not even halfway through bull market

Japan’s stock market revival is less than halfway through its lifespan, with the Bull run which started in 2013 set to continue for the remainder of this decade, Legg Mason’s Hideo Shiozumi has said.
Shiozumi, manager of the Legg Mason IF Japan Equity Fund, said Abenomics will continue to support equity markets over the next three to four years, with the series of bold policy reforms stimulating not only the economy but also company valuations.
“We are in the second stage of a bull market that has four stages in total,” Shiozumi said.
“Companies are now increasing dividends or buying back shares, and Japan’s return on equity is expected to go from 9% to 12%, while tighter corporate governance measures are expected to underpin these positive developments.”
Shiozumi said Abenomics was the key behind Japan’s economic revival, and with the second phase now poised to begin, he expects markets to climb further.
“To date Abenomics has proved to be very supportive for equity markets, and in May it will enter its second stage, when Prime Minister Shinzo Abe launches three new arrows consisting of further economic stimulus measures, enhanced child support and an increase in social security,” he said.
Shiozumi said the fresh round of measures being introduced had the aim of expanding the economy by 20%, addressing Japan’s aging society by raising the birth rate, and reducing the number of people leaving the workforce to care for ageing relatives.
He said: “The measures will have a positive effect on the Japanese stock market. Changes of this scale throw up investment opportunities, and we are well placed to benefit from them.”
As well as Abenomics, Shiozumi said the lack of exposure to equities among domestic investors in Japan was also poised to add additional support to equities.
“Currently, Japanese investors only have 5% in equities, but we think they will play a much greater role in future, and we are already seeing a ‘great rotation’ away from bank deposits into riskier assets such as equities and property,” he said.
Shiozumi’s fund continues to focus on “New Japan”, investing in companies benefiting from Japan’s shift from both a regulated to unregulated economy, and from a manufacturing to a service-oriented model.
This focus has seen the fund outperform the peer group over the last three years, with the fund returning 90.3% versus the Japan sector average return of 11.7%*.