Japan - quarter 2 commentary from AEGON Asset Management
The Japanese equity market made up some of the lost ground of the previous six months in the second quarter of 2008. The FT Japan index rose by 3% in sterling terms, though it finished the first half down by 3.5% overall. The market had a good April and May but turned lower in June as global markets weakened once again.
The upward move in the market came as foreign investors in particular once again latched onto the Japan inflation beneficiary theme as oil prices continued to rise sharply. Earnings revisions in Japan were solidly negative at a time when the market was rising and thus the prospective price earnings of Japanese equities was actually rising, unlike in other markets.
Commodities sensitive sectors outperformed as the oil price rose – with oil, paper, steel, shipping and trading companies the best performing sectors. The financial sector also demonstrated signs of life as Japanese government bond yields rose. The poorest performing sectors were either defensive or commodity users.
