Tags
2014, Developed Markets, DM, Emerging Markets, funds, HWSLJPQ, investment, Japan, mutual fund investment, Olympics, Olympics 2020
In March, there’s a new fund being launched by Hwang Investment Management Berhad. targetting specifically in Japan equities. Ever since the retract of funds from EMs that’started around May’2013 due to the QE tapering news, Developed Markets (EM), notably US, EU and Japan has hit double digits growth in the equities front.
To be frank, I missed the opportunity mainly due to the lacking of diversification in my portfolio, which focusing highly in Malaysia and some on EMs. Thus, with the announcement of this new fund, Hwang Select Japan Quantum Fund (HWSLJPQ:MK), I’ve decided to look into it, and perhaps take this as a chance to diversify into Developed Markets.
Here’s a list of positives and negatives that I’ve researched and compiled on Japan equities as a whole as investment:
Positives:
- Abenomics – This is a series of monetary + fiscal policy that’s being implemented in Japan by the latest Prime Minister to reignite the long-stalled Japanese deflationary economy since the 90s. These policies will try to inflate the economy as what QE has done to US, by pumping monies into the economy to try to move it and to encourage private investment from the public. In medium term from now, Japan will “take over” the role from US to pump liquidity into the global market through it’s monetary policy with low interest rates, printing money…etc. It’s arguable whether this will be better for the world with excess liquidity being created by a huge economy of the size of Japan, but the effect should be similar to what US has with its QE program.
- Being a Developed Market – QE ending means the EMs and FMs no longer has a solid advantages for being a target of foreign investments. The basics overnight rate differences between developed market and others will be less, and huge funds will be recalled back to home country or look for a more solid country in terms of financial and economy standpoint.
- Olympics 2020 – Lastly, we should not overlook the fact that Japan is being selected as the Olympics 2020 hosting country, and we can definitely expect huge investment from the government in its own country. And being so, the companies in Japan will be highly benefited.
Negatives:
- Abenomics – Even with such a stellar results after Abenomics being implemented, Japan has 30%+ (TOPIX and Nikkei) returns from the stock index, there’s a risk that such policies might create problems that will surface in the later stage due to the huge inflow of liquidity.
- Expensive Valuation – After the huge jump in 2013, the current valuation of Japan Equities is at 18 for 2014. The projected valuation only come down to 15 in 2015. However, the fact that the fund strategy is value-investing based, I’m not worried much on this.
After some comparison of the positives and negatives, I’ve decided to include this new fund into my aggressive portfolio, with ~11% allocation. This will be a medium term investment, typically 3-5 years of investing period. Few reasons that why medium term, Olympics will be in year 2020, still 6 years to go for the domestics investment to gradually to pickup and the 2014 valuation is in the range of 18, would need 3 years to go into cheap valuation of 13. I will be holding it at least in the said period (3 yrs and above), provided the fundamentals doesn’t change much, and the exposure to Japan still strategically fits my overall investment portfolio.