Some Japan equity strategists are recommending investors hold off any hunt for bargains until trade tensions cool after the U.S. midterm elections.
A possible decline in protectionist rhetoric once congressional elections end in November may allow investors to focus on Japan's strong earnings that have been overlooked because of fears of a trade war with the U.S., according to analysts. Japanese stocks have borne the brunt of Asia's slump because many market participants consider the shares to be cyclical, meaning that global investors tend to sell them first on signs of an economic slump.
"We're bullish on Japanese stocks as they are extremely cheap in valuation relative to other markets," said Hiroshi Matsumoto, head of Japan investment at Pictet Asset Management Ltd. in Tokyo. "Real buying may come into Japanese stocks once the market goes through the midterm earnings releases starting in late October and the U.S. interim elections in early November."