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Japan consumption tax an ‘acid test’, says Henderson property manager
by Nick Tay on Aug 20, 2013 at 13:58
The plan to raise consumption tax rates in Japan will be a major test of political will and must be approved, said Henderson's Tim Gibson.
The month of September will be a key time for the Japan market as a clear decision to raise consumption tax rates will be a signal that the government is able to enact structural reforms.
‘It’s an acid test of political will to push the tax forward. There’s no reason why the tax shouldn’t be pushed through and it should be done,’ said Gibson, head of Asian property equities at Henderson Global Investors.
He has managed the Henderson Asia-Pacific Property Equities since January 2011.
‘If the consumption tax is pushed through, equity markets will react positively, because it’s a sign the government has control and can push through structural reforms,’ he said.
The fund manager's team of three includes Eric Khaw and Wong Yan Ling, and while Gibson is the lead portfolio manager, all investment decisions are debated among the three. Gibson believes three is ‘the perfect size’, saying more people would lead to too many voices and ‘diseconomies of scale’.
While the investment process focuses on bottom up stock selection and typically avoids top-down bets, certain high conviction situations do warrant taking a large overweight to a market.
Japan is a key market that the team has taken a large geographical bet, which has paid off thus far.
Hits and misses
As at end-June, Japan made up 45.9% of the portfolio and this position paid off despite a few misses.
‘While the overweight in Japan helped, where we missed out was in the smaller more leveraged stocks in the market which rallied more than 100%.’
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