* 8-pct fall in yen improves Japan's Inc's earnings outlook
* In uncertain times, Abe govt seen as stable and
* Foreign investors bought 1.2 trln yen of Japan stocks in 3
* Currency-hedged Japan stocks' performance beats U.S.,
By Tomo Uetake
TOKYO, Dec 5 When U.S. voters elected a
president who promised to "Make America great again" they also
convinced many investors that putting money in Japanese stocks
would be a smart play.
By weakening the yen against the dollar, Donald Trump's
shock victory in the Nov. 8 U.S. election succeeded in doing
what Japanese policy makers have been struggling to do for most
of this year.
For investors, the weak yen means Japan's mighty exporters
will be showing stronger earnings.
"The biggest beneficiary of this election is the Japanese
market," said Jonathan Steinberg, chief executive officer of
U.S. asset manager WisdomTree, which manages $38 billion, of
which $8 billion is invested in Japan.
"The world outside of Japan is understanding that they need
to buy Japan, with the currency hedged, because of the inverse
relationship between the currency and the equities," he said.
The rise of populism in the developed world has also made
Prime Minister Shinzo Abe look good, despite disenchantment over
the failure of his "Abenomics" to reflate Japan's economy.
Abe may have fallen short delivering structural reforms but
he is still pro-growth, and is regarded as stable - he's
expected to stay in power till at least 2021 - and predictable.
That is a comfort for investors who could endure a
roller-coaster ride with Trump, and fear upheavals ahead in
"No foreign investors are talking about 'Abenomics' any
more. Instead, they are buying Japanese stocks on 'Abe premium',
the stability of his government," said Kyoya Okazawa, head of
global markets, Japan and Korea at BNP Paribas Securities in
"At least you can predict his policies... you don't know
what France and Germany will do, or what the U.S. will do," he
They don't know who French voters will choose to replace
President Francois Hollande. Doubts are creeping in over how
Germany's Chancellor Angela Merkel will fare in an election next
No-one knows how the British government will exit the
European Union. And, Prime Minister Matteo Renzi's defeat in a
referendum at the weekend to reform Italy's constitution has
spread anxiety over the state of the EU, driving the euro to a
The confluence of these faraway factors had led to a
sea-change in foreigners attitude toward Japan.
"The excitement is coming back for the first time in three
years. I got a lot of requests for meetings from investors
overseas," Okazawa said, noting that foreign investors had been
earlier overwhelmingly underweight Japan.
During the last three weeks of November, they bought 1.2
trillion yen worth of Japanese stocks. They'd begun buying a bit
in October, after dumping 6.2 trillion yen in the first nine
months of the year.
Some European asset managers have already upgraded their
views on Japanese stocks.
Julius Baer, a Swiss private bank with assets under
management of 327 billion Swiss francs ($324 billion), went from
neutral to overweight two days after the U.S. election, its Asia
chief investment officer Bhaskar Laxminarayan told Reuters.
Deutsche Asset Management, which manages 719 billion euro
($767 billion), also put Japan overweight, said Sean Taylor,
chief investment officer for the Asia Pacific.
"Because of the yen, and because valuations of other
equities are now more expensive, Japan looks much better,"
Takashi Ito, equity market strategist at Nomura Securities,
estimated that a fall of one yen in the dollar boosts
Japanese companies' recurring profits by 0.4-0.7 percent.
Since Nov.8, the dollar has gained almost as much as 10 yen,
with the Japanese currency weakening more than 8 percent to a 9
1/2-month low of 114.83 yen per dollar.
Japan's Nikkei benchmark index has risen 6.4 percent
since Trump won.
To protect their investments in Japanese stocks, foreign
investors hedge their exposure to the weakening yen, and the
performance from this currency-hedged strategy has beat most
other stock markets since the U.S. election.
WisdomTree Japan hedged equity ETF, one of the most
popular Japan stock ETFs listed in the U.S., has risen as much
as 10 percent since the U.S. election.
But WisdomTree's ETF was still up 9.0 percent, compared to
2.5 percent rise in U.S. S&P500 and fall in many other
Similar currency-hedged ETFs for European stocks
were down 0.6 percent while those for emerging markets
have lost 3.3 percent.
WIDE FOCUS TO CLOSE-UP
Foreign investors have mostly bought the indexes and liquid
large-caps, rather than select individual names or sectors,
according to market participants.
And the biggest winners since the U.S. election have been
financial shares that benefited from rising global yields,
mirroring U.S. stock markets.
But going forward, fund managers say, they are particularly
interested in robotics-related companies, including automakers
and electronics makers that have a technological edge.
"We are overweight in high quality cyclical companies,
mainly in the industrials sector. We continue to hold a positive
view on companies such as Keyence Corp, Nidec Corp
, Mitsubishi Corp, and Daikin Industries Ltd
," said Daisuke Nomoto, head of Japanese equities at
Columbia Threadneedle Investments in Boston.
"While uncertainties still exist around the details of
Trump's economic policy, these globally competitive companies
should be able to capitalize on any pick-up of U.S. economic
growth and also be able to weather a negative impact associated
with any new trade policies introduced under the Trump
($1 = 1.0100 Swiss francs)
($1 = 0.9373 euros)
($1 = 113.5200 yen)
(Additional reporting by Hideyuki Sano; Editing by Simon