Valuations Are Beginning to Look Attractive for Japanese Equities

TOPIX bounced back sharply after falling to a post-Lehman failure low of 701 on March 12, 2009 and rising two months later to 885 and three months later to 951. On November 24, 2011, TOPIX had fallen to 706, approaching its post-Lehman failure low and closed at 716 today. According to Citi’s Japanese Equity Strategist, Kenji Abe, valuations and corporate profits are looking attractive now and 2012 could well see another spectacular rebound for the Japanese market.  

Though he suggested that the rebound is likely to hinge on the ability of the euro zone nations to formulate an adequate response to the current crisis, we think there is some quick money to be made over these few months. Investors who wish to position themselves for the rebound in general can look at Schroder International Selection Fund Japanese Equity Alpha USD (http://www.fundsupermart.com/main/admin/buy/factsheet/factsheetSDIJEA.pdf). It has an alpha return of 9% over three years and invests primarily in undervalued equity (P/E of 12.2 versus 14.4 of benchmark). We believe investors will be handsomely rewarded if they can catch the bull at the right time.

Disclaimer: This is not an investment advice or recommendation. Investors should seek the advice of their financial adviser first before making any investments.

MAS Introduces New Regulations to Safeguard Investors

Come 1 Jan 2012, intermediaries have to formally assess a retail customer's investment knowledge and experience before selling certain products. This is to comply with the new regulations from The Monetary Authority of Singapore (MAS). Advisers who sell Specified Investment Products (SIPs) will also have to pass additional examinations on product knowledge and analysis.

The affected investment products are:

1.    Excluded Investment Products (EIP) such as shares, unit trust and insurance

      2.    Listed SIPs such as exchange-traded fund (ETF) and futures; and
      3.    Unlisted SIPs such as investment-linked insurance policies

Therefore, if a client wants to invest in any unlisted SIP, he will have to pass the Customer Knowledge Assessment (CKA) to ascertain that he has the relevant knowledge or experience to understand the risks and features of the product. On the contrary, if he decides to invest in listed SIPs, he will have to pass the Customer Account Review (CAR) to ensure he understands the risk of complex structures or derivatives before he is allowed to trade such products.

A client is not allowed to trade the specified product if he fails to pass the test. However, if he insists to go ahead with a transaction, the financial planner must offer advice to them. In such cases, the MAS will not allow "execution only" services.

Over the long run, this will benefit the community as more awareness is being created. While the financial industry welcomes any measures to safeguard the interests of the investors, MAS must also exercise caution not to hamper our competitiveness as a financial hub.