Japan is ‘Perfect’ Place For Cross Asset Investors, SocGen Says

(Bloomberg) -- Japan stocks’ 32% rebound from their March-low may have legs, according to a cross asset research note from Societe Generale SA.

Japan now seems the “perfect place to be,” especially in equities, a team of strategists including Alain Bokobza wrote in a note published Tuesday. The firm increased its weighting on Japanese stocks to the maximum it’s allowed, expecting them to benefit from “super-solid” balance sheets, rising dividends, political stability and relative cheapness, according to the note.

In addition, the Bank of Japan also “dissuaded” those wanting to buy the yen as a portfolio protection, the team said.

“As decreasing risk perception takes over globally, we prefer Japanese equities over Chinese equities, with the former having shown some defensive characteristics during this market meltdown,” the team said. “Japan is perceived as a safe-dividend haven.”

Japan’s Topix index has recouped more than three fourths of the losses triggered by the coronavirus pandemic. The recent rally has pushed the gauge into overbought territory, based on its 14-day relative strength index.

Considering the rally, SocGen recommends a balanced global allocation for cross-asset investors, with 45% of assets in fixed income and cash, 45% in equities and the balance in commodities. It prefers laggards in each group, the team said.

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