Look east for investment opportunities
Given stable prospects for the global economy, investors have been looking east for investment opportunities. In this Research Weekly, our experts look at the reasons behind recent interest in the Japanese market, and explain why declining demand for industrial metal in China shouldn’t blind investors to copper’s prospects.
Key take-aways
- The way forward for the global economy looks stable following the shocks of the last three years.
- We maintain a Neutral rating but advocate select Japanese quality stocks.
- The Chinese recovery may be running out of steam but the long-term prospects for copper look good. We recommend taking exposure via copper futures or a futures-based copper index.
The big swings in the global economy are abating. Unlike after the shocks in the past three years, the way forward looks more stable. This does not mean that there is anything resembling a boom ahead. But the past limbo of not knowing what the economy is going to do next – tanking or bouncing back – is less of an issue.
Instead, economists are busy tweaking their numbers to capture the latest changes, most of them minor ones. This means looking at the rates biting into the economy and trying to spot the ‘big thing’ that could derail the economy. For the time being, we cannot spot it either. The commercial real estate market is not big enough for that, and neither is the crisis in the regional banks. Granted, it remains a close call whether a recession looms. In fact, we frame it as the closest call possible: 50:50.
In China, the reopening bounce is softening as well, and we cannot spot many levers policymakers can or are willing to pull to add fuel to the fire. In Europe, by contrast, the situation appears better than most thought last year. All in all, then, we still think that summer 2023 will be – like most of the year to date – about going east for investment opportunities.