Edison Exhibits – the Japanese market
Last |
High |
Low |
10-year
|
Last as
|
Dividend
|
|
|---|---|---|---|---|---|---|
| Japan | 14.3 | 20.5 | 10.5 | 13.8 | 104 | 2.3 |
| UK | 12.7 | 15.7 | 8.5 | 12.6 | 101 | 4.2 |
| US | 17.9 | 19.0 | 11.2 | 15.4 | 116 | 1.9 |
| Asia ex-Japan | 13.6 | 16.3 | 10.5 | 12.9 | 106 | 2.5 |
| World | 15.2 | 16.3 | 9.8 | 13.6 | 112 | 2.5 |
Source: Refinitiv, Edison Investment Research. Note: Valuation data as at 1 November 2019, based on Datastream indices.
The charts show Japanese equities have provided solid returns for UK-based investors over the past five to six years, with smaller and mid-cap stocks mildly outperforming the broad-based Tokyo Stock Price Index (TOPIX).
While this has in part been boosted by the relative weakness of sterling since mid-2016, it also represents something of a return to favour for the world’s second-largest developed stock market, after the best part of two decades in the wilderness. Japanese equities are not immune to current global macro headwinds, such as the US-China trade war (a particular worry given many Japanese companies manufacture in China) and the slowing economy, but their relatively low valuation versus world markets provides a measure of support.
Currently only the UK – which has been deeply out of favour because of the prolonged period of Brexit uncertainty – is more cheaply valued on a forward P/E basis compared to its 10-year average. Furthermore, corporate governance reforms in Japan are boosting returns to shareholders through measures such as share buybacks and dividend payouts. As a result, the historically lowyielding market now has a dividend yield higher than the US, and only a little below the regional and global averages, providing a further underpinning for total returns in what may continue to be a volatile period for share prices.
