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Julian Gibbs

Most leading fund managers, according to several recent surveys, expect the Japanese stockmarket to end the year higher. For the first time in many years, I think they are right.

The time to buy into a market is when it is near a low. The Japanese market is more than 67 per cent off its high and 8 per cent down since the beginning of the year.

Scott McGlashan, the Japanese fund manager I most admire, believes it is now the time to buy. McGlashan was one of the few fund managers who publicly told delegates at a conference in 1996 to sell investments in his fund. Days later, the Nikkei began to fall by record amounts.

He has now been managing the Close Finsbury Japanese equities fund for just over a year and, despite having to clear out some of the stocks in the existing portfolio, it is already second in its sector.

Why Japan? Because it looks as if the new prime minister, Junichiro Koizumi, may well become Japan&#39s Margaret Thatcher. He has promised to cut the annual budget deficit by limiting future government bond sales, has pledged to accelerate the deregulation of key industries, such as telecommunications, and is tackling the chronic bad debt that has hamstrung the Japanese banking system since the property boom burst in 1990.

Sentiment towards the Japanese stockmarket is particularly negative at the moment but this presents a buying opportunity for stockpicking fund managers such as McGlashan and for investors who are looking to gain from the increasing profitability of many Japanese companies.

If Koizumi succeeds in his reforms, then the potential upside for the stockmarket is enormous and should start coming through within the next few months. The Close Finsbury Japanese equities fund is, in my opinion, a strong buy.


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