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Weekly Manager Views: Equities

16 July 2020

At GAM Investments’ Weekly Equities Meeting held on 14 July, Reiko Mito provided an update on Japanese equities and discussed opportunities arising for businesses as a result of Covid-19.

Reiko Mito - Japanese Equities

In recent months we have seen several structural changes and opportunities emerge for businesses operating in many countries, including Japan. For example, structural changes in the lifestyle space as a result of Covid-19 include the digitalisation of shopping / leisure / payments, working from home and online medicine. Such changes impact areas such as e-commerce / streaming / cashless payments, 5G and the digitalisation of medicine. Elsewhere, in manufacturing we have witnessed the acceleration of automation, a quest for production efficiencies and reviews of supply chains which relate to factory automation, industrial robots and artificial intelligence (AI). At the same time, businesses have had to consider potential cost burdens, such as securing credit lines, a pile up of inventory levels and, in some cases, a repatriation of production sites.

Looking ahead, we may see short-term volatility in markets as company earnings are announced. However, we believe the outlook for the second half of the year is likely to improve. Underlying demand and infrastructure are intact, which we believe makes it possible for a fast economic restart. We believe growth in Japanese corporates in the medium term is sustainable due to AI, as well as the internet of things (IoT), continued new business opportunities and more efficient work processes. Meanwhile, demand is associated with the evolution of technologies such as 5G and the cloud, demand for electric motorisation and autonomous driving, as well as cashless settlement – initiatives supported by the Japanese government. Ultimately, we continue to favour businesses with superior long-term growth potential, low leverage and resilient earnings.

Important legal information
Source: GAM unless otherwise stated. The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is no indicator for the current or future development. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice. Reference to a security is not a recommendation to buy or sell that security. The companies listed were selected from the universe of companies covered by the portfolio managers to assist the reader in better understanding the themes presented. The companies included are not necessarily held by any portfolio or represent any recommendations by the portfolio managers. July 2020.