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(Bloomberg) — Warren Buffett’s $6 billion wager on Japan’s trading companies may serve as a catalyst to bring back foreign investors to the country’s value-sector heavy stock market, according to some strategists.
Berkshire Hathaway Inc.’s acquisition of stakes in five primary commercial corporations that dominate Japan’s energy and commodity industries: Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui – Co. and Sumitomo Corp. – shows the U.S. conglomerate probably beyond the pandemic and betting on global growth, said Amir Anvarzadeh, senior strata
“Given the highly cyclical nature of the Japanese market, betting on commercial corporations is underlining their commitment that economic cycles would possibly hit the back and beyond the pandemic,” Anvarzadeh said. “If the price starts to outperform growth, investors will start to focus on Japan, and that would be a bigger replacement than buffett’s doing.”
Japan turns out to be a wise choice for the global investor, with its shares trading well below its old relative valuation relative average relative to its global peers, at least on a future value basis. Traditional cost sectors (industrial, monetary and fabric) account for approximately 37% of the Topix benchmark, according to knowledge compiled through Bloomberg.
The stocks of all trading houses rose on Monday, giving a touch to the bese Topix, which has fallen 6% this year, with a 4% increase in the MSCI AC World index. Foreign investors have sold $43 billion in net Japanese stock so far in 2020, en route to the largest annual withdrawals since 2018.
Abe’s departure
Berkshire’s betting revelation comes when investors assimilate Friday’s announcement that Prime Minister Shinzo Abe will have to resign, causing the Topix to fall by 1.6% that day. The departure of the country’s oldest prime minister may simply put the political threat back on the agenda; the top market watchers do not expect government policies to replace much.
Buffett, who turned 90 on August 30, recently purchased other commodity-related names, such as Barrick Gold Corp., suggesting that Berkshire is moving its portfolio to oppose long-term inflation, said Shinichi Ichikawa, senior researcher at Pictet Asset Management in Tokyo. The names of Japanese commercial corporations are also smart coverage options, he said.
“While it is not transparent if this will only express sectors or the Japanese market as a whole, Berkshire’s bid can become a catalyst for foreign investors to take note and look for other Japanese stocks that act as smart hedges against inflation,” Ichikawa said.
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