Japanese markets and country-specific exchange traded funds retreated Tuesday, but contrarian investors may find that the pullbacks are opportune and cheap entry points into a growing economy.
Poor Chinese data pressured Asian equities Tuesday, with the iShares MSCI Japan ETF (NYSEArca: EWJ) down 4.2% and Deutsche X-trackers Japan JPX-Nikkei 400 Equity ETF (NYSEArca: JPN) 4.9% lower.
Additionally, the currency-hedged Japan ETF options were also falling off on a stronger yen currency. On Tuesday, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) fell 5.3%, iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) dropped 5.4% and Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) declined 5.7%.
Asian stocks, especially Japan’s market, plunged after a fresh set of weak Chinese manufacturing data weighed on the neighboring economies.
However, Peter Oppenheimer, the chief global equities strategist at Goldman Sachs, argues that investors should use the latest bout of market volatility to bulk up on Japanese equities, reports Matt Clinch for CNBC.
Specifically, Oppenheimer pointed to improvements within the economy for the first time since the 1980s, which have translated to better equity valuations, compared to the U.S.
“Valuations are not that extreme there (in Japan), so I think you’ve got the combination of a tailwind from policy and from the currency – but actually some real fundamental improvements from corporate profitability,” Oppenheimer told CNBC.
For instance, corporate capital expenditure jumped 5.6% in April through June year-over-year.
George Boyd-Bowman, manager of the Neptune Global Income fund, also pointed out that Prime Minister Shinzo Abe’s third arrow is tackling structural reforms, notably among corporates, and pushing more firms to increase share buybacks and dividend payouts, reports Emma Wall for Morningstar.