(Bloomberg) -- Lombard Odier is turning bullish on Japanese equities, seeing the market as a sweet spot whatever the outcome of the US election.
“I feel that Japan right now is in a win-win situation,” said John Woods, the firm’s Asia chief investment officer, at a media event in Singapore on Wednesday. A victory by former President Donald Trump would help the dollar remain stable or strengthen, boding well for Japanese stocks, he said. On the other hand, if Vice President Kamala Harris wins, tariffs will likely be off the table, which would also boost the nation’s shares.
The Swiss private bank upgraded Japanese equities to overweight from neutral last week, Woods added.
The call came despite Japan’s stock market rally flagging in recent months, amid questions about the policy priorities of new prime minister Shigeru Ishiba and swings in the value of the yen which may crimp the profits of the nation’s exporters. The Topix Index is down around 10% from its peak in July, and foreign investors have backed away after a buying spree earlier this year.
“We think that Ishiba, the Liberal Democratic Party and their coalition partner are not likely to rock the boat in a meaningful way,” said Woods, addressing the political uncertainty. “I think this consumption driven economic growth outlook will remain in play.”
Meanwhile, Lombard Odier has reduced UK equities to neutral from overweight after the Labour Party’s recent victory. He said that “every government has to wash their dirty laundry,” which could have an impact on the market. The benchmark FTSE 100 Index is up around 7% this year, but has been largely range-bound since the new government came to power in July.
Woods also reiterated his cautious stance toward Chinese stocks, which have soared since late September following a stimulus blitz. “I think it’s a story about momentum, and I will let those investors take the first 10%, 15%,” he said. “Once we see some meaningful policies behind the so-called recovery, then maybe we’ll be keen to invest.”
Read: Lombard Odier Dumped Entire China Allocation, Won’t Buy Rebound
--With assistance from Winnie Hsu.
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