Now is the time to buy the dip when it comes to Japanese equities, according to Societe Generale’s Dylan Grice.
Grice concludes that while he was considering buying in before, now he’s certain.
But the fact is, there are those out there far smarter than me who thought the Japanese equity market was at bargain basement levels before the earthquake. And while I wasn’t sure I was in their camp a few weeks ago, as it has now come off the best part of 20%, the decision is now easier to make.
This doesn’t mean Grice thinks Japan’s government doesn’t have a debt problem, or that the situation in Fukoshima is going to work out fine. He does think you can hedge out the risk from the government debt threat, but in terms of another Chernobyl, he’s not so sure.
So I’ve been watching these experts and wondering, are they telling us that another Chernobyl cannot happen because it absolutely cannot happen under any circumstances, or are they falling into the trap of thinking that because it’s not a Chernobyl-type reactor. If so, doesn’t the possibility that a Chernobyl type leak could happen in a completely new and hitherto unanticipated way remain open?
But, even if it did, this may present a further buying opportunity, according to Grice.
But if it does, we could see another 20% off the Topix in very short order. At that point we should be buying with both hands…
And here’s a chart that shows why Grice thinks Japanese equities look very cheap.
Photo: Societe Generale
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