The domestic Japanese economy remains sluggish, but with valuations close to an all-time low, stocks look attractive, especially in the event of a weakening of its currency, says Bruno Springael, Senior Investment Manager, Global High Dividend at ING Investment Management…
Regionally, there is value to be found but one must be cautious. Japan is likely to offer value and we have seen encouraging signs in emerging markets in Asia and Latin America, with inflation moderating and growth numbers not as negative as first feared.
“However, North America’s economy is showing no signs of improvement, despite recent positive developments in the labour and housing markets, and its currently relatively rich valuations mean an increased risk of market underperformance.”
Across the Eurozone, the crisis is expected to continue dominating the headlines. However, a lot of bad news is discounted in its price and the outlook for exporting companies has improved due to the underperforming Euro. Conversely, the weak domestic demand experienced in the UK and Switzerland over the past quarter is being negatively affected by both countries strong currencies versus Euro.
In terms of stocks, the second quarter swayed towards cyclical sectors, such as Industrials, IT and Consumer Discretionary, and away from Consumer Staples, Financials and Cash.
US equities were the winner in H1, rising by 11% - 2% of which can be attributed to the weak performance of the Euro. Japan, meanwhile, advanced 7% but the weaker Yen brought the return in Euros down to 6% growth. Europe, thanks to a strong June, ended the half up 5%.
In Q2 2012, the ING Invest Global High Dividend fund outperformed the benchmark MSCI World by 0.12bps, offering a 4.2% dividend yield and a pay-out ratio of around 50%.