Finaport’s Goetti Says Abenomics to Support Stocks, Weaken Yen

Japanese equities are likely to rise and the yen will weaken further as economic recovery combined with monetary easing continues in the country, according to Hans Goetti, Singapore-based chief investment officer for Asia at Finaport Investment Intelligence.

He spoke today with Rishaad Salamat on Bloomberg Television’s “On the Move.”

On Abenomics:

“You have these three arrows and I think the most important one is the third, which is the reforms. There is a fourth component, a fourth arrow, that is in the pipeline, which will be the increase in the sales tax, but that’s something that is not on the table right now. We think that the real issue will be how fast reforms can be implemented.

‘‘There is traction in the economy and it looks like Abenomics seems to be working - at least we’re in the early stages but it seems to be working and we are bullish on Japanese stocks based on this.”

On Japan’s easing:

“The Japanese are continuing on their very aggressive QE, I mean there’s no talk of tapering there, in fact the Japanese economy is starting to gain traction as well. In fact if the U.S. economy was doing as well as the Japanese economy is doing right now they would taper in no time.”

“We think the combination of an economic recovery in Japan and continued very easy monetary policy bodes very well for Japanese equities and of course on the other hand gives rise to the view that the Japanese yen will weaken quite a bit even from these levels.”

On outlook for the U.S.:

“We are looking for tapering later this year, maybe as early as September if economic data continues to improve, and I think that has relevance to all markets globally.”

“This is one of the weakest economic recoveries in history, that’s true, I mean we have growth around 2 percent, which is usually at this stage in the cycle you would have about twice as much and for the Fed to taper I think we need to see growth in the third and the fourth quarter exceeding 3 percent. This has not happened in this recovery yet but it’s not completely impossible, but the bar is relatively high.”

On China:

“We had this credit crunch which has been somewhat alleviated by liquidity injections by the central bank, but I think the biggest concern is whether this will lead to some kind of deleveraging cycle where lending becomes more difficult, where borrowing becomes more difficult, and then the economy slows dramatically into the latter part of the year -- I think that’s the biggest concern.”

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