Optimism Among Asian Fund Managers for Japanese Stocks

Asian fund managers remained largely bullish on Japanese stocks, according to a BofA survey, despite increased uncertainty regarding Japan's political and monetary policy outlook.

Sentiment towards China appears more balanced; while investors still anticipate a robust economy, their enthusiasm for more stimulus from Beijing has diminished.

The BofA survey, conducted from November 1-7 and involving 213 panelists managing a total of $565 billion in assets, revealed that approximately 45% of respondents held Overweight positions in Japan, the highest concentration recorded. In comparison, 8% were Overweight on China, while 5% were Overweight on the Philippines and Taiwan each.

Japan continues to be the preferred market in Asia, followed by China. Conversely, 8% of respondents were Underweight on both Australia and India, and 11% were Underweight on South Korea, according to BofA.

Despite uncertainties regarding a potential second Donald Trump presidency, sentiment towards Asia remained relatively positive. Trump has promised to implement steep trade tariffs on China and increase import tariffs on other Asian countries, which could pose economic challenges for the region in the coming years. Traders are now keenly observing the extent of these tariffs as Trump prepares to take office next year.

Japanese stocks have maintained favor even as a late-October rally in the Nikkei lost momentum. BofA noted that investors slightly reduced their return expectations in the latest survey due to normalizing profit expectations and high Japanese valuations.

Within sectors, BofA indicated that a fascination with technology persists among Asian investors, despite a recent downturn in semiconductor stocks. In China, investors continue to focus on artificial intelligence, chips, and internet stocks, as buyback and dividend strategies gain popularity.