Japan's market worth a look

ANDREW LEAKEY

March 10, 1992|By Andrew Leakey

With the Japan vs. America battle of words and products going full blast, it's worth noting that Japan's stock market and economy have been on a losing streak.

Following a meager 8 percent gain last year, the Japanese stock market is down by a similar percentage in 1992. That traditionally overvalued market is an amazing 45 percent below its peak level in 1989, when the slide began.

Meanwhile, the country has lurched into recession as the Bank of Japan has boosted interest rates. It's unlikely to snap out of it until the end of this year, or perhaps 1993.

The good news is that American mutual fund investors who believe in buying the stocks of Japan now have an opportunity to purchase at greatly reduced prices.

The bad news is that no one can be sure the Japanese slide is really over.

"It's a risky time to invest solely in "It's a risky time to invest solely in Japan, in light of its economic slowdown and the likelihood the shakeout from previous political scandals isn't over yet," warned Bernice Behar, research analyst for John Hancock World Pacific Basin Equity Fund.

Funds such as hers blunt the negatives by diversifying among many different Japanese stocks and the stocks of other Pacific Basin countries.

"Right now the Japanese stock market is trading in a fair range, but is still not cheap, with room for the market to fall further through mid-June," added Dana Martin, portfolio manager of the Fidelity Pacific Basin Fund, which has 53 percent of its portfolio in Japan.

"However, an investor with a long-term perspective should invest gradually into the Japanese market, putting in some money every three months or so."

Favorites in Ms. Behar's portfolio include the Sankyo pharmaceutical company, the Toa Doro Kogyo road-building company and the York Benimaru regional supermarket.

Mr. Martin's holdings include Hong Kong Shanghai Banking Corp., Honda, Toyota and Sony Corp.

"The once-bullish market in Japan finally realized that it couldn't sustain high price-to-earnings ratios and that its marketplace is riddled with scandal and unfair practices," said Don Phillips, vice president with Morningstar Inc., which publishes the Mutual Fund Sourcebook.

"Nonetheless, Japan's long-term prospects are excellent."

Top-performing stock funds with a significant portion of portfolio in Japanese stocks, according to Morningstar, are:

* GAM Pacific Basin Fund, New York; $32 million in assets; 5 percent "load" (initial sales charge); $10,000 minimum initial purchase; year-to-date down 0.24 percent; in 1991 up 14.94 percent.

* John Hancock World Pacific Basin Equity Fund, Boston; $14 million in assets; 5 percent load; $1,000 minimum initial purchase; year-to-date down 0.96 percent; in 1991 up 11.63 percent.

* Nomura Pacific Basin Fund, New York; $50 million in assets; no load; $1,000 minimum initial purchase; year-to-date down 3.24 percent; in 1991 up 9.72 percent.

* DFA Japanese Small Company Fund, Santa Monica, Calif.; $150 million in assets; no load; $50,000 minimum initial purchase; year-to-date down 8.40 percent; in 1991 up 8.25 percent.

* Fidelity Pacific Basin Fund, Boston; $91 million in assets; 3 percent load; $2,500 minimum initial purchase; year-to-date down 4.36 percent; in 1991 up 7.57 percent.

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