View more on these topics

Eastern philosophy

Last week, Aberdeen’s Hugh Young was over from Singapore to share his views on Asian markets with investment professionals in London. I have known Hugh for some time and respect his judgement. He was responsible for developing the Aberdeen Asset Management investment process and recently he and his team picked up the outstanding investor accolade at the OBSR Awards.

I was keen to learn what he felt about this highgrowth area but, sadly for me, he had picked my birthday for the event. Although unable to attend, I did receive some valuable insight secondhand. While I am more suspicious of opinions gathered in this way, the impression I gained of his current approach accords with my knowledge of how he views these markets.

Hugh is, for example, healthily sceptical with regard to Chinese companies. I recall him warning some time ago of the need to remain close to the businesses in which he was investing as Chinese management has a propensity to embark upon frolics if left to their own devices. So mainland China was significantly underweight in the portfolios he ran, which embraced the whole region.

He is also pretty downbeat about Japan, describing the country as “moribund”. Given that I was reading only last week of a fund manager convinced the corner had been turned there, I found the conflicting views rather heartening. Japan is something of the Marmite of investment destinations – you love it or you hate it. By and large, those on the hate side of the equation have had a rather better time of it for a little while now.

Japan-watching has some merit. The country suffers from the developed world disease in spades. Excessive indebtedness, adverse demographic pressure, interest rates at virtually nil – this has been the story there for two decades. The result has been a stockmarket that has fulfilled Hugh Young’s description of “moribund” to a T. The worry is that this might be the model for the rest of us.

Japan is something of the Marmite of investment destinations – you love it or you hate it.By and large those on the hate side of the equation have had a rather better time of it for a little while now

On the plus side, Western markets had not been driven to sky-high valuation levels by the rush to participate in the biggest growth story since the second world war. Not only were international players jumping on the bandwagon, Mrs Watanabe, the ubiquitous domestic investor, was ever present. Today, it is the Mrs Watanabes of this world who are steadfastly refusing to re-enter the market, let alone the burnt gaijin.

And, of course, Japan had its own banking crisis but well before the financial meltdown that hit the Anglo-Saxon economies.

The result, of course, was that Japanese financial institutions escaped relatively unscathed from the credit tsunami that ripped around the world. But Japanese equities still remain at a fraction of the level achieved at the end of the 1980s, even if the valuation criteria applied today stacks up well against other markets.

Indeed, look at the numbers on what was the world’s second-biggest economy until China leapfrogged it earlier this year and you might conclude that the reason shares are failing to make progress is that investors are still refusing to forgive the value destruction Japan meted out over two decades.

Real GDP has risen since the bubble burst, albeit modestly, the corporate sector has deleveraged massively, dividends are rising and even the yen looks stable.

But Hugh, like so many fund managers, does not view this market favourably. In the end, that is probably as good a reason as any for being cautious but it will be worth keeping an eye on the land of the rising sun. Certainly, the overall tone of his presentation was optimistic for the Asian region. Or so I was told. I need to catch up with Aberdeen’s investment guru some time soon.

Brian Tora is a consultant to investment managers, JM Finn & Co

Recommended

Canada Life launches group CI policy

Canada Life has introduced a group critical illness policy offering scheme members a range of support services such as Red Arc and Best Doctors. Both services come as part of the policy. Red Arc provides practical and emotional support to scheme members and their family at the point of claim. A personal nurse adviser will […]

Govt unlikely to sell bank stakes soon

The Government is likely to hold on to its stakes in Lloyds Banking Group and Royal Bank of Scotland until the banking commission publishes its report on how to shore up the banking sector. UK Financial Investments, which manages the government holdings in the banks, is  likely to hold onto its stakes due to the […]

31

Journalists are qualified to do their job

A long time ago, when I was cons-idering a career in journalism, the traditional entry route into the industry for most budding reporters was via a local newspaper. Generally after A levels, you signed up to do your indentures, a two or three year apprenticeship interspersed by and concluded with a series of exams set […]

‘Lend or lose your bonuses’

Chancellor George Osborne says he will take a tough line on bank bonuses if lending to small businesses does not increase. He said: “Let me make this clear today, we will not allow money to flow unimpeded out of those banks into huge bonuses if that means money is not also flowing out in credit […]

Life cover for life

When someone mentions whole of life plans, most people will think of a niche product that serves as an inheritance tax planning tool for high-net-worth clients. And it’s really not surprising they’ve been pigeonholed in that waybecause before the arrival of RDR in 2013, that’s more or less exactly what they were. For advisers thinking […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com