Japanese companies promising in 2019



Yunyoung Lee, portfolio manager for the Japanese smaller companies strategy, says strong fundamentals relative to other developed markets mean prospects for Japanese companies should remain good into 2019.

What are the key themes likely to shape markets in 2019?

Compared to other major markets such as the US (end of tax benefits, US China trade wars), Europe (Italy, Brexit) and EM (global tightening, US China trade wars), Japan offers relatively strong fundamentals in the next year. Thanks to a weak yen and improving domestic economy, corporate Japan continues to deliver strong earnings momentum. Before July upper house election and October GST hike which are two most important events for the final phase of Abenomics, the government will fully focus on supporting the economy and market via supplemental budget and market friendly policies. Highly cash rich corporates accelerate to do share buyback together with Bank of Japan.

Where do you see the most important opportunities and risks within your asset class?

We see strong corporate earnings momentum, stable political background, market friendly central bank stance and improving corporate governance continue to drive the market higher. We currently like companies in sectors which benefit from the strong domestic economy, for example, construction. We also like companies which benefit from price hike. Given rapid change of sector leadership in the market, we continue to focus to the company specific stories based on our intense management interviews program. The risks to the market include a Chinese hard landing, increasing oil prices and a sudden strengthening of the yen.

How have your experiences in 2018 shifted your approach or outlook for 2019?

We haven’t changed our approach. We continue to use the strategy of stock selection based on ‘catalysts’ ie events with potential to trigger a change in company performance, as well as portfolio rebalancing based on quarterly management interviews. We continue to make our fund concentrated with high conviction ideas based on a bottom up approach.

Which themes have the potential to redirect markets in 2019? Download our one-pager summary to find out

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

For promotional purposes.

Anything non-factual in nature is an opinion of the author(s), and opinions are meant as an illustration of broader themes, are not an indication of trading intent, and are subject to change at any time due to changes in market or economic conditions. It is not intended to indicate or imply that any illustration/example mentioned is now or was ever held in any portfolio. No forecasts can be guaranteed and there is no guarantee that the information supplied is complete or timely, nor are there any warranties with regard to the results obtained from its us.

Important information

Please read the following important information regarding funds related to this article.

Janus Henderson Horizon Japanese Smaller Companies Fund

Specific risks

  • Investment management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
  • Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • The Fund could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Fund.
  • If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
  • Derivatives use exposes the Fund to risks different from, and potentially greater than, the risks associated with investing directly in securities and may therefore result in additional loss, which could be significantly greater than the cost of the derivative.
  • If the Fund or a specific share class of the Fund seeks to reduce risks (such as exchange rate movements), the measures designed to do so may be ineffective, unavailable or detrimental.
  • Shares of small and mid-size companies can be more volatile than shares of larger companies, and at times it may be difficult to value or to sell shares at desired times and prices, increasing the risk of losses.

Risk rating


Important message