Japan Prime Minister Shinzo Abe’s efforts to revive the economy and fight deflation could lead to further gains in the country’s stocks, according to the head of Temasek Holdings Pte’s fund-management unit.
Abe needs to get through next month’s election for the upper house of parliament before he’s able to detail his reform plans, said Manraj Sekhon, chief executive officer of Fullerton Fund Management Co. Abe’s success in pushing his policies could drive earnings higher and more liquidity into equities, Sekhon said a press conference in Singapore today.
The Bank of Japan’s bond-purchasing program and other measures helped push the Nikkei 225 Stock Average 28 percent higher this year, the best performance among developed markets worldwide. The yen fell 12 percent in 2013, the second worst among 16 major currencies tracked by Bloomberg.
“It’s early days yet,” Sekhon said. “If Abe gets what he’s doing right, it will be very positive for the equity market.”
There’s still a lot of liquidity in the Japanese market, with funds waiting to be invested, he said.
The Nikkei fell 1.5 percent today, retreating from the biggest advance in two years yesterday, after the Bank of Japan kept its policy unchanged and the yen gained. Policy makers refrained from expanding their tools to address bond-market volatility, sticking with an April plan to double the monetary base as they seek to rekindle inflation and stoke growth.
“It shouldn’t surprise people if it goes down a bit” after the rally in the past five months, Sekhon said. “The volatility we have seen is not totally surprising.”
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