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Japanese stocks are cheap vs S&P
Posted: Thu Jun 04, 2020 8:14 am
by captainspoke
Just a
Bloomberg article, noting P/E gap between the Topix and S&P:
Japanese Stocks Have Neven Been This Cheap Relative to S&P 500
Kurt SchusslerJune 4, 2020, 2:41 PM GMT+9
Japanese stock valuations have trailed U.S. levels for a long time, but the recent rebound from the coronavirus selloff has driven the gap into new territory.
The Topix index’s climb into bull-market zone has left it trading at around 16 times earnings estimated for the next year, near the highest level since 2013. Yet the multiple on the S&P 500 Index has surged even faster to around 22 times. While Japanese stocks have been at a discount consistently since 2013, the gap now is the largest in data compiled by Bloomberg going back to 2005.
Topix valuation gap with S&P 500 has widened in recent rally ( <-has a graph in the link)
“While U.S. stocks have enjoyed ever-greater multiple expansion, Japan has seen relentless multiple compression,” CLSA Ltd. strategist Nicholas Smith wrote in a report Wednesday. “Japanese valuations are tightly correlated with foreign buying, and foreign investors are now heavily underweight Japan.”
Overseas traders were net sellers of the nation’s equities in 14 of the past 16 weeks, withdrawing a total of nearly 7.3 trillion yen ($67 billion) in stocks and futures since mid-February. Smith said the pessimism of foreigners was unwarranted given Japan’s relatively light toll from the pandemic.
UBS Group AG shares a similarly positive view. Japan is one of the best-placed markets to benefit as the global lockdowns gradually ease, according to strategists led by Niall MacLeod. The broker maintained its overweight view on the country’s stocks in a note dated Thursday, citing their “cyclicality” as economies start to rebound as well as their cash-generating capabilities.
(Updates with latest market, foreigner transaction data)
Before it's here, it's on the Bloomberg Terminal.
Re: Japanese stocks are cheap vs S&P
Posted: Thu Jun 04, 2020 9:18 am
by Kanto
So as the pandemic restrictions ease (For better or for worse) developed markets are recovering.
The S&P is rising faster than TOPIX. An investor overweighted in Japanese stocks *surprisingly* thinks Japanese stock represents a good investment opportunity as it is currently undervalued.
This has been the case for some time right!?
Re: Japanese stocks are cheap vs S&P
Posted: Thu Jun 04, 2020 11:59 am
by TokyoWart
My understanding is that there is also a historically unusual gap between US equity valuations and Emerging Markets (which usuall trade at a premium as measured by P/E to the S&P 500 but for a few years now are at a discount). However, it isn't clear to me how anyone is estimating the "E" part of that P/E ratio right now.
Re: Japanese stocks are cheap vs S&P
Posted: Thu Jun 04, 2020 11:06 pm
by captainspoke
Kanto wrote: ↑Thu Jun 04, 2020 9:18 am...
This has been the case for some time right!?
Sure, but the article points out that it's the size that counts
and connects that to another factor or two.
"While Japanese stocks have been at a discount consistently since 2013, the gap now is the largest in data compiled by Bloomberg going back to 2005."
And as TW offers, there's at least a passingly similar bit of data for emerging markets.
**
I wasn't offering this as actionable, just for discussion. (It seemed like something that was a rung or two up the ladder from the usual smoke and mirrors.
)
Re: Japanese stocks are cheap vs S&P
Posted: Fri Jun 05, 2020 3:32 am
by jcc
Rebalancing as I go has really helped me buy things at their various lows.
it's gotten me to buy developing nations when that was dumpstered by covid, and when nikkei recovery was lagging behind developed nations it got me to buy that.
It's always kind of disconcerting to be buying the thing that doesn't seem to be performing right now, but it's really helped me fall from the trap of buying the various indices as they are peaking, and instead buying them when they're lagging others.
Re: Japanese stocks are cheap vs S&P
Posted: Wed Jun 10, 2020 1:36 am
by fools_gold
Alternatively...US stocks have never been so expensive!
I sold some bonds in mid-March and also added some cash to buy more stocks. Not as much as I would have liked, but I was pretty sure that it was only the beginning and the market would keep dropping. I can't believe how quickly things have turned around. I'll keep contributing as usual, but I don't really trust this recovery.