Posted inEquitiesJapan

Japanese equities return to favour

European investors committed some €1.4bn to Japanese equities in February, with the bulk of this money being invested in index trackers. It was the first month since July 2015 when net inflows exceeded the €1bn mark.

The uptick in interest comes as the Topix index has proved resilient in spite of a strong yen. Despite the yen gaining almost 8% against the dollar over the past two years, the benchmark Japanese equity index is still up slightly over that period.

The renewed strength of the yen has coincided with a decreasing appetite to hedge currency risk for the asset class, which was common practice among European investors until a couple of years ago. But investors have been preferring unhedged exposure to Japanese equities for the past two years.

Absolute return on the up

Meanwhile, multi-asset and long/short absolute return funds have seen an acceleration in inflows at the start of the year. Apparently, investors are looking for a parachute as equity markets have continued their rise while fixed income volatility edged up too. Both categories saw the highest monthly inflows since the summer of 2015.      

Part of the Bonhill Group.