Japan Reawakens - The End of the Beginning?

Thanks for your opinions. Will give it more thought.

Made some money with Platinum Japan Fund and sold, waited a year as it stalled, bought back in and lost it all again. Hmmm.... Should have kept to my instincts which were: Wouldn't the Japanese take sometime to build their confidence of going back into their stock market after 17 years of decline. The 2005/2006 spike was mostly from foreigners. ...

But I listened to Platinum who are “Still finding companies that they want to buy” Although the market has just rocketed from foreigners.

The latest from 31/12/07 “Japan should outperform in down markets” as I read between the lines, yes, perhaps a 20% fall is better than a 40% fall for other markets!

But in all fairness I didn't give Platinum their 5-7 years.
Look after your own money.

I'm keeping with my instinct that we are entering a “Bear market” world wide.

MR. said:

The latest from 31/12/07 “Japan should outperform in down markets” as I read between the lines, yes, perhaps a 20% fall is better than a 40% fall for other markets!

But in all fairness I didn't give Platinum their 5-7 years.
Look after your own money.

I'm keeping with my instinct that we are entering a “Bear market” world wide.

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Yep, I didn't give them 5 years either, just 3. So, they will skyrocket over the next 2......

My instincts are with you MR obiwan.

60% cash with some gold and a couple of specs now.

Several factors to think about for the re-emergence of Japan Equity:

1. US dollar index has recently finished a bullish double bottom. It touched 74.484 on 22/11/07 and a higher low of 74.849 on 1/02/08. During the past week, the U.S. dollar index has rallied to where it briefly moved above 77.
Japanese housewives soon, if not finally abandoning their careers as currency speculators and will return to invest in their own share market.
2. Japan is one of the few developed country in the world that will not suffer from collapse of housing bubble over the next few years.
3. Japan equity valuation is at the lowest since 2003.
4. Hedge fund reallocations from Asian emerging markets to Japan (this assuming that emerging markets will substantially underperform in the next few months)

I think the only way to get value out of Japan is via real-estate. Land and property values have been falling for 15 years- until last year when they finally rose a bit. GJT is currently offering an 8c div on a sp of 70c (up from 7.2c last year), so more than 10% yield. Babcock & Brown Japan is another one. In general when rents come up for renewal, they are increased. RE market is tight, partly due to nobody wanting to build something to sell into a falling market I would suppose (no speculative building) and partly due to an 80% collapse in housing starts in the last 12 months. Presumably if you can't build something new, you have to rent an existing property?

http://business.timesonline.co.uk/t.../construction_and_property/article2781022.ece

By the way, I have lived in Tokyo since 2004 and have chatted to someone from B&B Japan (BJT) who I met at the pub and also know people who have bought and sold houses in the last couple of years and done pretty well out of it.

Japanese companies are trading below book value in some cases. Yes some of them are, but how are you going to realise that value? A takeover and breakup? Hard to do given the poison-pill strategies often employed by vulnerable companies and the web of cross-shareholdings (admittedly in the process of being unwound). Dividends from Japanese companies are low by world standards and cash just piles up in the company's bank account, one reason for the sluggish consumer demand I read in a book somewhere. Wealth created by companies is not recycled back into the economy via dividends, so consumers are unable to spend that cash, reducing domestic demand and helping to ensure deflation continues. Domestic demand is very important to the Japanese economy because exports form only about 20% of the economy (this small figure surprised me when I read it). Companies are not able to find profitable ways to invest the cash either, so it just sits in their bank account. An example of the strategies employed is the Bulldog sauce company. Takeover price offered in mid 2007 was 1700 yen or so. Current sp? 250 yen or so. Here's some background on it:

http://www.stippy.com/japan-work/bull-dog-sauce-feeds-steel-partners-poison-pill/

Doesn't make one very optimistic about the ability to realise value, even if you buy these low priced stocks.

exgeo said:

I think the only way to get value out of Japan is via real-estate. Land and property values have been falling for 15 years- until last year when they finally rose a bit. GJT is currently offering an 8c div on a sp of 70c (up from 7.2c last year), so more than 10% yield. Babcock & Brown Japan is another one. In general when rents come up for renewal, they are increased. RE market is tight, partly due to nobody wanting to build something to sell into a falling market I would suppose (no speculative building) and partly due to an 80% collapse in housing starts in the last 12 months. Presumably if you can't build something new, you have to rent an existing property?

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I was so close to buying RJT and GJT about a year ago. I look them up from time to time and can not believe how bad they have gone.

Say RJT Rubicon Japan Trust. I was waiting at one stage for when it went back to $1- it is $0.059 now. Debts..... You get a leveraged return but you can't get much worse than this. (I'm sure this was not part of the plan!) The debts concerned me at the time but I'm not sure why I didn't buy when it went below the dollar. I hope you survived!

What's wrong with buying property with a capital raising with no debt? I guess its just greed.......

At one stage I looked at buying Japanese housing directly but the prices scared me off and involved too many eggs in the one basket.

Noticed some directors today bought some GJT

MR. said:

But I listened to Platinum who are “Still finding companies that they want to buy” Although the market has just rocketed from foreigners.

The latest from 31/12/07 “Japan should outperform in down markets” as I read between the lines, yes, perhaps a 20% fall is better than a 40% fall for other markets!

But in all fairness I didn't give Platinum their 5-7 years.
Look after your own money.

Click to expand...

Just 5 posts above, and a year ago, I wrote the above regarding Japan and the Platinum Japan Fund.


Did a little more reading because a few are talking about Japan and I noticed something of interest from the latest 31/12/08 Platinum's Japan Fund 1/4 report.
"Japanese equities finally started to solidly outperform global equities - 29% decline in the MSCI Japan Index versus a 42% decline in the MSCI World Index"

http://www.platinum.com.au/arc-pjf.htm

huh...... Dam, Japan has done 9% worse than I thought.

With the strength in the Yen vs Aud over the period, in Aud terms, nothing gained nothing lost. The Japan Platinum Fund sits as it did a year ago. If I could pick it anyone could. I guess Kerr Neilson and co saw this coming as well lucky the Yen became as strong as it has! Their International fund sits also as it did a year ago. interesting! Guess the currency has some to do with this again?