Why great gloom may mean great gain

Article Abstract:

The Japanese economy has been hit by recession, but stock prices could still perform well since they may have dropped low enough to have taken account of bad news. Dividend yields are higher than bond yields and discounts for investment trusts are larger than average. There is a large amount of savings available to invest when the market turns, and low bond yields make stocks more attractive. Earnings growth may be hampered by lack of restructuring, and stock prices could fall further, but unless economic growth ceases, stocks appear to offer opportunities.

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Japan

Article Abstract:

Japanese equities have tended to perform poorly in the 1990s, and the economy has been hit by recession. There has been some recovery in stock prices, though it is unclear how long this will last. Banks have been hit by bad debts, and production is falling in manufacturing. Banks are using stricter criteria when lending, and companies are starting to restructure. Japanese stock prices could benefit if domestic investors decide to save for their retirement using stocks.

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A buying panic

Article Abstract:

Japanese stocks could attract investors, according to Merrill Lynch. Portfolio managers have tended to move out of this market which is cheap and the Japanese profit cycle is at an early phase. The financial sector is undergoing a reorganization and economic indicators are favorable. The Jun 25 Tankan survey is likely to be weak but this is likely to mean that the Bank of Japan will be relaxed and the Japanese yen is likely to remain weak.

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