Baer Sticks to Bullish Call on Japanese Equities Amid Yen Strength

Swiss private bank Julius Baer remains optimistic about Japanese equities despite the strengthening yen. Louis Chua, equity research analyst Asia at Julius Baer, highlighted that the earnings season in Japan started strong, with 72% of companies beating consensus estimates and 68% beating revenue estimates.

The yen's recent rise has not deterred Julius Baer from taking a constructive position on Japanese equities. Chua notes that historically, Japanese equities and earnings have fared well alongside a weaker yen, but the current strong earnings fundamentals in Japan suggest a healthy recovery in the Nikkei 225.

Companies' earnings guidance continues to assume a conservative dollar/JPY rate of 152, which is below the current spot levels. This suggests meaningful room for foreign-exchange market-driven earnings upside, Chua said. With the Nikkei 225 trading at a forward price/earnings ratio (P/E) of 20.7x and expected to generate a forward return on equity (ROE) of more than 12%, Chua maintains a positive view on Japanese equities.