Rathbones’ Coombs less bearish on Japan

Rathbones’ head of multi-asset David Coombs has “grudgingly” added Japanese equity exposure to his funds for the first time in more than 10 years.

Mr Coombs – whose team runs three multi-asset products – admitted having missed out on Japan’s equity market rally last year, which saw the Nikkei 225 index rise 56.7 per cent in local currency terms.

This followed a wide-ranging set of promises from prime minister Shinzo Abe to bring Japan out of a multi-year cycle of deflation and economic stagnation.

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The move back into Japanese equities reverses a strong call that had seen the Rathbones multi-asset funds have no direct exposure at all to the region. Mr Coombs likened Japan’s economic recovery to that of Europe and said investors were taking similar risks.

But he acknowledged that now the economic data had started to improve following the government’s massive stimulus programme – dubbed Abenomics after the country’s prime minster – was initiated last year.

“We’ve been very sceptical on the Abenomics theme because there have been things like this in the past,” Mr Coombs said.

“What has made us reappraise this is the data now seems to be supporting the view that Abenomics is having a positive impact.

“I came away from Tokyo 18 months ago feeling pretty bearish, so I’m now just closing that bet off. It is a grudging acceptance, but I still want to be convinced.”

The manager emphasised that he still did not have “massive enthusiasm” about Japan as he was “seriously sceptical” about the ‘third arrow’ of Mr Abe’s reforms, which include policies aimed at bringing more foreign workers to Japan and encouraging more women to work full time.

Mr Coombs said he was waiting for signs of real wage growth to boost consumer spending before he would become more confident in the long term outlook for Japan.

“If I saw large companies pushing through decent pay rises so that real disposable incomes started rising then I would get much more enthusiastic,” he said. “We need the consumer to go out and spend.”

He also highlighted any potential fall in the oil price as a boost to Japan, which is more reliant on oil in the wake of the 2011 earthquake and tsunami which caused significant damage to nuclear power stations.

In Mr Coombs’ Multi-Asset Total Return, Multi-Asset Enhanced Growth and Multi-Asset Strategic Growth funds he has added exposure to the JPMorgan Japanese investment trust, run by Nicholas Weindling, and the newly-launched Michinori Japan fund, an offshore product run by London-based boutique Goodhart Partners.

The Multi-Asset Enhanced Growth and Multi-Asset Strategic Growth funds gained 10.9 per cent and 10.8 per cent respectively in 2013, while the Multi-Asset Total Return fund gained 4.9 per cent, according to FE Analytics.