PA ANALYSIS: Time to bail out of Japanese equities?

Added 15th February 2016

What was viewed as a sign of desperation by many when the Bank of Japan cut rates well into negative territory at the end of January has been followed by a poor economic growth number.

PA ANALYSIS: Time to bail out of Japanese equities?

With Japan reporting its economy shrunk 1.4% in the fourth quarter of 2015 on an annualised basis investors may well be asking; if that is all the country can manage even with a vast quantitative easing programme and rock bottom interest rates what prospects are there for the aging nation?

There is justifiable optimism about the positive impact that corporate reforms and increased workforce participation by women could have, but this may well take many years to feed through into share prices.

In the meantime perhaps investors should bank any money they have made in the period immediately after the QE programme launched and have another look in five years’ time.

Looking at the chart below, many investors who added broad exposure to the market in 2013 or 2014 could still pocket a nice profit if they bail out now.

The direction of travel this year so far looks ominous though, meaning those who sit tight could be back where they started or even in loss making territory if things do not change quickly.

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About Author

Alex Sebastian

News Editor

Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.

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