HEAD-TO-HEAD: Invesco vs Pictet AM

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Luke Ng, FE Advisory Asia

Introduction

Japanese equities have been singled out by a number of wealth managers.

Union Bancaire Privée (UBP), for example, has put Japanese equities in the spotlight as a preferred asset class.

The firm’s Zurich-based chief investment officer for private banking, Norman Villamin, previously said that Japan has the fastest rate of earnings growth – around 50% faster than the US and Europe, and Japanese companies also provide an average dividend yield of 2%.

“Unless you believe a financial crisis is coming, then Japanese corporates present very good value going forward,” he said earlier this year.

UBS Wealth Management also recommends investors have an overweight position in Japanese equities, according to its latest house view report.

“While both the Eurozone and Japan are heavily geared to the global cycle, the former has priced in macro recovery while the latter has not. Eurozone stocks look expensive compared to the Japanese market,” the report said.

Deutsche Bank Wealth Management believes that Japanese corporate fundamentals and strong consumer confidence should support Japanese equities over the next 12 months, according to its second quarter CIO report.

“Corporate Japan remains fundamentally attractive in terms of strong balance sheets, low leverage and solid earnings. However, the slowdown in the economic cycle leaves us on the sidelines just a bit longer,” the report said.

Luke Ng, Hong Kong-based vice president at FE Advisory, warned investors about the risks looming in Japan, including the US-China trade conflict.

“The current trade tension remains a risk, especially since Japan is an export-oriented economy,” he said.

In addition, Japan is expected to increase consumption tax, which will have some impact on companies that focus on the domestic sector.

“Both the export- and domestic-focused businesses will have some sort of issue,” Ng said.

Nonetheless, he remains positive on the asset class. Valuations remain attractive compared to other developed markets and a number of Japanese companies also remain under-researched, which should provide alpha opportunities for stock pickers, he said.

Against this backdrop, FSA asked Ng to compare two Japanese equity products: the Invesco Japanese Equity Advantage Fund and the Pictet Japanese Equity Selection Fund.

Source: FE Analytics

* 8 July 2016 – 10 July 2019

** 9 July 2016 – 5 July 2019

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