Sentiment towards Japanese equities has accelerated past the US and Europe as the most positive on the outlook for 2015, according to the latest Fidelity Analyst Survey.
The annual survey, which collates the views from Fidelity’s team of 159 analysts following their 15,000 company visits every year, found Japan had taken over from the US as the country with the most positive outlook for investment returns.
The Fidelity analysts said Japanese companies were the most likely to deliver increasing return on capital and dividend payouts this year, with prime minister Shinzo Abe’s reforms providing a substantial tailwind for companies.
In contrast, the sheen appears to have come off US companies, as the world’s largest economy slipped back to third behind Europe and Japan after heading the sentiment index last year.
Following years of strong growth, US executives now believe the economic recovery is maturing, so company growth will not be as considerable as in recent years.
While 75 per cent of Fidelity’s analysts predicted Japanese companies would, on average, achieve a growing return on capital in 2015, this decreases to only 23 per cent for the US.
Japan has bucked the general trend from this year’s survey of declining confidence in companies, compared with last year.
The overall sentiment index from Fidelity’s analysts, which looks at company and country prospects on a score of 0 to 10, has dropped from 6.4 points in 2014 to 5.7 points in 2015.
Henk-Jan Rikkerink, head of equity research at Fidelity, said: “It’s very interesting to see that Japan stands out as the strongest region overall, and bucks the trend in a number of areas in the survey.
“For the time being at least, it seems the reforms initiated by prime minister Abe appear to be working. Japanese companies are giving the Abenomics reform programme the benefit of the doubt, and the indicators show we will see an impact on the real economy.”
Mr Rikkerink added there was a “real sense that corporate governance is going to improve in Japan” and that a trend towards “generating a high return on equity is becoming fashionable”, which should support further market gains.
At sector level, the Fidelity analysts were most positive about healthcare companies.
The survey found 60 per cent of Fidelity’s healthcare analysts reported “increased management confidence among their companies and an equal number expecting rising returns on capital”.
At the other end of the spectrum was the energy sector, where 85 per cent of Fidelity’s energy analysts reported a “deterioration in management confidence” and 92 per cent expected a “decline in return on equity”.
Last year’s analyst survey had a high success rate on its predictions – claiming the US would be the best-performing major region and that developed markets would outperform emerging were both true.
The survey had also tipped a pickup in merger and acquisition activity and an improvement in business confidence, adding that investors were likely to prefer companies with intellectual capital, such as tech or healthcare, over those with hard assets, such as mining and energy companies.