IDEA of the month: With this issue we continue to increase our equity weight by buying MSCI Japan with 5% weight and selling the .……
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Japan has a high earnings growth for 2011 of 20% and for 2012 of 25% partly due to recovering earnings after the earthquake. Based on 2012E P/E Japan trades at 10.9, marginally above the MSCI World at 10.7. Japan looks particularly attractive on the CROCI valuation.
Our Japanese strategist has a Topix target of 1,000 for end 2011E, which gives an upside of 17% from the current level. The performance of Japan has strongly lagged behind the other major regions of the world over the last 2 years (for details on Japan see page xx). The MSCI Japan also gives Yen exposure and thereby some currency diversification outside the Euro (and outside the USD).
This could be helpful in a time where the problems related to Greece and the Euro are still far from being resolved. Lnvestors around the world remain firmly focused on European Sovereigns and on Greece in particular and a Sovereign accident (ie full default) could lead to shockwaves across every asset class in every part of the world.
Our portfolio has performed 1.6% YTD (see page 12). The Dax position which we have bought one month ago has worked quite well and we stick to this position ahead of a Q2 reporting which could well be relatively strong for German companies. Our commodity position has been a drag to our portfolio over the last month, but we stick to this position. Our commodity strategists expect higher oil prices ahead as the concerns of a hard landing in China are overdone. We also stick to our positions in the Utilities and Healthcare sector and our short positions in Emerging markets, as our strategist continue to expect Emerging markets to underperform Developed markets.
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Source: Trading Ideas ETF: Ideas and Flows – Deutsche Bank AG