The Bank of Japan’s increasingly unpredictable measures mean investors are wasting vital efforts trying to second guess an erratic policy body, equity veteran Rupert Kimber has warned.
In a fund update for the Tiburon Taiko fund, Citywire + rated Kimber, who has over 30 years investment experience, said markets are being distracted by focusing too closely on what the central bank may or may not do next.
His comments come in the wake of the Bank of Japan announcing a 10-year bond yield target as part of wider stimulus efforts, which saw yields on government debt pushed below the 0% target.
‘We sense the fixation with the BoJ, in itself a useless exercise given the erratic nature of Mr Kuroda, is seriously side-tracking investor attention at just the moment when the corporate landscape is looking quite interesting.
‘It is these developments that continue to warrant an ongoing investment in Japanese equities, given cheap valuations and superior shareholder returns which we continue to draw to the attention of investors.’
Kimber, who was previously noted for his strong performance during the early period of Abenomics, said the focus on macroeconomics may be leading investors to overlook the high level of merger and acquisition activity currently at play in Japan.
‘Significant industry mergers and competitive bids from private equity groups for listed companies are frankly run of the mill events in the daily life of corporate America. However we are not talking about America but Japan,’ he said.
‘There has been a flurry of recent activity, a logical extension to the pursuit by management for better operational returns especially as underlying trading conditions become tougher without the cushion of the weaker yen. The multi-year restructuring we have discussed over recent years would now appear to be taking a new direction.’
Kimber said the ‘acid test’ for the success of this change will be if private equity firms move into the mid-cap part of the market. He said this could help address Japan’s long-history of poor shareholder relations and cross-shareholdings.
In the Tiburon Taiko fund at present, Kimber has 29 positions and the largest single allocation is a 5.1% exposure to Seven & I Holdings, which is a retail group. The largest sector exposures are to electrical appliances, which make up 14.1% of the fund and foods, which account for 13.9%.
The Tiburon Taiko returned 15.9% in Japanese yen terms over the three years to the end of September 2016. This compares to an 8.8% loss by its Citywire-assigned benchmark, the MSCI JPANA Hedge 100% GBP, over the same period.