(Bloomberg) -- Japanese equities are “still cheap” and the Nikkei 225 Stock Average will likely rise more than 20% to 29,000 next year, according to Oki Matsumoto of Monex Group Inc.
Matsumoto, a former general partner at Goldman Sachs Group in Japan, said the local stock market is where investors could “aggressively seek capital gains,” given its valuations are relatively low compared with the U.S. and Europe. The benchmark Topix index is trading at less than 14 times its 12-month forward estimated earnings compared with the S&P 500 Index, which is at 18 times.
“My view is more bullish than Monex Securities’ official view for the Nikkei 225 to rise to about 27,000 yen,” Matsumoto, the founder and chairman of the Japanese brokerage, said in a phone interview. “I see the top end of the range for Nikkei 225 at around 29,000 yen.”
The Nikkei 225 rose 18% this year to 23,656.62, reversing last year’s 12% dip and capping its best performance since 2017. The broader Topix advanced 15%. Japanese stocks rallied since September thanks to a phase-one trade agreement between the U.S. and China that eased concerns for export-reliant Japan.
A recent increase in the number of tender offer deals will add momentum to Japanese equities, attracting fresh interest, Matsumoto said. He cited Hoya Corp.’s offer to spend as much as 147.7 billion yen ($1.35 billion) for NuFlare Technology Inc., a rare hostile takeover bid among Japanese companies, as an example.
Matumoto noted the U.S. presidential election in November may pose a risk for Japanese equities. “Wariness over the outcome is likely to trigger profit-taking when equities are on the rise,” he said. “The risk of a slowdown in domestic consumption following the Tokyo Olympics will also serve as a reason to sell.”
“The way up will be a slow-paced process, overcoming selling from cautious investors,” he said.
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