In terms of sheer drama， the Japanese market‘s performance last week was tough to beat. A growing corporate scandal， with a high-profile police raid and a subsequent apparent suicide， was topped with the near-collapse of the Tokyo Stock Exchange. Is the market as compelling for investors as viewers？
Most of the factors underpinning last year‘s 40 per cent rally remain in place. The economy continues to expand – albeit， on consensus numbers， at a slightly slower pace than last year. Deflation is virtually over， setting the stage for a return to normalised monetary policy. Its demise should also help shift some of the $7，000bn of household assets sitting in banks into riskier assets， and perk up property prices. Corporate net earnings are forecast to rise 9 per cent this fiscal year， the fourth consecutive year of growth， and balance sheets are strong.
Much of that cash， however， could be put to better use. This year‘s expected 17 per cent increase in dividends translates into a total payout of only $32bn by companies listed on the TSE： the same amount as Microsoft’s 2004 special dividend. Mergers and acquisitions surged last year to $240bn according to Dealogic. But the bulk of that is consolidation within group companies or orchestrated deals.
There are risks to the bull scenario. Deflation， for example， may prove more stubborn as deregulation and competition unleash further price cuts. Japan remains relatively expensive， even after the two-day slide of last week. On a price/earnings basis， it trades at a premium of roughly 20 per cent to the US. Yet there is room for returns on capital to expand. Well-paid babyboomers will shortly be retiring， cutting payroll costs. Japan Inc has plenty of scope to improve capital efficiency， returning cash to shareholders and gearing up. Add the prospects of continued liquidity， and the market remains a buy. Always assuming， of course， the TSE is open.
发表于 2006-4-3 12:32:35