In response to ongoing global volatility, notably lingering uncertainty in China, international investors may want to stick to more stable markets, like Japanese equities and country-specific exchange traded funds.
Dan Chamby, who helps manage a $90 billion BlackRock global strategy, said he is overweight Japan and the U.S. dollar after the recent bout of global market volatility, Bloomberg reports.
After the major sell-off in Chinese markets, BlackRock warned of increased volatiltiy ahead due to a potential slowdown in China’s economy and an end to record low interest rates.
Consequently, the BlackRock money manager overweights the steadier Japanese market, including a 12% tilt toward Japan, compared to the 4.5% of its reference benchmark.
Chamby pointed out that after two decades of declines in the Japanese equities market, Japanese companies have greatly reduced debt and accumulated cash. Consequently, the firms look attractive as Prime Minister Shinzo Abe pushes for better corporate governance, which could lead to greater shareholder value.
“There are so many opportunities across so many different parts of the market; it’s not just one sector that we are interested in,” Chamby told Bloomberg. “This is a market that can continue to rise over the next several years, not just the next several months.”
Given BlackRock’s tilt toward the U.S. dollar and preference for Japanese equities, ETF investors can also track BlackRock’s position through currency-hedged Japanese stock ETFs.