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Reaction to Japanese tragedy

Fund managers say it is extremely tough to make short-term predictions about the economic outlook for Japan following the tragic events triggered by last week’s earthquake.

PSigma Investment Management chief investment officer Tom Becket says the lack of certainty over the nuclear threat and the devastating impact of the earthquake and tsunami, which have claimed the lives of more than 10,000 people, make short-term equity judgements redundant.

However, he believes the medium-term picture is more solid. He says: “The facts that were important for Japanese companies before this crisis, such as an improving global economy and cheap valuations, remain in place.”

Jupiter head of independent funds team John Chatfeild-Roberts says his team has been slowly building exposure in the Jupiter merlin balanced, growth and worldwide funds over the past four months. He says any negative impact has been offset by defensive holdings such as gold and cash.

He says: “We will monitor the situation carefully as it is going to take some days to work out the impact of these terrible events. Our holdings focus on investing in companies displaying fundamental value rather than growth and we have confidence in the fund managers we have chosen.

“We have also hedged the yen within the portfolios, which should provide some protection against the currency falling, particularly in the event of the nuclear situation deteriorating.”

Rathbone Unit Trust Management head of multi-asset investment David Coombs marginally raised his allocation in Japanese equities aftermarket falls early this week.

Coombs says the main outstanding concern remains the nuclear issue, which is something he is unable to make a call on.

He says: “Japan has suffered more crises than most, like the Kobe disaster in 1995. It is a sophisticated economy and its people have proved resilient in the past. Increased liquidity has been pumped in and with corporates being invol-ved in the recovery, I expect GDP to be accretive on the back of having to rebuild.”

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