Don’t overlook Japan, mortgage market could withstand Brexit, and Euro high-dividend equities

Alister Sneddon, CTO

Here are the top 3 insights for June 3rd, prepared by Alister, our CTO.

Today’s Brief

  • Fidelity: Don’t overlook Japan
  • S&P Global: The U.K. Residential Mortgage Market’s Resilience Could Withstand Brexit Pressures
  • NN Investment Partners: Unearthing value in Euro high-dividend equities

Don’t overlook Japan

  • Despite risks from slowing global trade and the threat from US-China tensions, investors should not overlook the opportunities in Japan.
  • Indeed, while the outlook for equity returns has been tempered by cooling earnings growths, the significant compression that we saw in Japanese price-to-earnings ratios over the course of last year suggests that this has now largely been discounted.
  • Looking ahead, we see a favourable risk/reward trade-off for investors in Japan over the mid to long-term with valuations testing historical lows in some parts of the market.
  • The policy backdrop from the Bank of Japan remains benign and as we progress through the year we expect the authorities to deploy counter measures to mitigate the effects of the upcoming consumption tax hike in October.
  • There is also encouraging signs of progress being made on structural reforms.

Genuine Scores for the top 3 Japanese focused funds

  • Hennessy Japan Fund, 69
  • SPARX Japan-JPY, 61
  • Nikko Listed IDX Fund 225, 58

The U.K. Residential Mortgage Market’s Resilience Could Withstand Brexit Pressures

  • Recent loan-level and transaction-level regulations alongside consistent economic growth have contributed to the U.K. mortgage market’s improved performance over the past decade.
  • However, origination volumes began declining on the back of stretched affordability and political uncertainty following the Brexit referendum.
  • The mortgage and RMBS markets’ reaction and performance in the foreseeable future remains uncertain, with the outcome of Brexit negotiations weighing negatively.
  • We expect the low interest rate environment to remain supportive of both low arrears and house prices.

Genuine Scores for top 3 UK listed REIT stocks

  • Globalworth Real Estate Investments, 61
  • Assura, 60
  • Land Securities, 54

Unearthing value in Euro high-dividend equities

  • Eurozone stocks have faced a bumpy ride since NN IP launched its NN (L) Euro High Dividend fund in April 1999
  • Nicolas Simar has managed the fund since inception and is still convinced of the investment case
  • We see value in integrated oil firms and cyclicals, which are currently priced for a recession

Genuine Scores for the top 3 EuroZone focused funds

  • UBS ETF MSCI EMU hedged to USD, 57
  • UBS ETF — MSCI EMU Socially Responsible, 45
  • iShares Euro Dividend ETF, 32

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All the best,
Alister and the Genuine Impact Team

p.s. all Genuine Scores are accurate as of the 16th of April