Kirin, a part-time investor with 11 years of investment experience, discusses a year-end scenario. The article examines how sharp moves in USD/JPY, the impact of long-term interest rates and a renewed escalation in Middle East tensions could affect Japanese equities.
The biggest move over the past 3 months was in USD/JPY, and the view was expressed that the progress of yen appreciation could affect the direction of Japanese equities. Most recently, USD/JPY reached the ¥163 range before being seen in the ¥153 range on the interview date, 13 September, potentially affecting companies' budgeting. Major companies are generally assuming exchange rates in the lower ¥150 range, and it was said that levels below ¥150 could weigh on exporters' earnings.
Regarding the rise in long-term interest rates into the 3% range, the view was that the impact was surprisingly limited. High-dividend stocks continue to be bought, and although it was noted that the relationship between interest rates and share prices cannot be generalized, companies with scope to increase dividends or that have set dividend-on-equity (DOE) targets, as well as banks whose core businesses improve as interest rates rise, were identified as areas that should continue to attract attention.
Regarding tensions in the Middle East, it was said that they have repeatedly flared up and eased, but from a personal perspective have not had a major impact on investment decisions. At the operational level, materials prices are rising while the pass-through to customers is progressing, and the impression was that the situation follows a pattern similar to naphtha prices.
As an investor, the speaker said that portfolios should be considered in line with the direction of the market, while expressing a desire to avoid sharp movements. The view was that readers should take their individual financial circumstances into account and examine each company's earnings materials, dividend policy and earnings trends separately.