This journey also reflects the true grit, resilience and sheer perseverance of the Japanese throughout history, as well as the stoicism of a community constantly threatened by natural disasters and a nation facing geopolitical challenges from its immediate neighbours: Russia, North Korea and China.
Unlike the pilgrims who walked, we drove. To fill up the 30-litre tank, it cost us just the equivalent of $40 — less than half of what it would cost in Singapore. Now, fuel prices in Japan would have been higher if not for JPY1 trillion ($8 billion) drawn from its fiscal reserves to help subsidise gasoline, diesel and kerosene. The country managed to stabilise petrol at JPY170 per litre on average. Another emergency package of JPY5 trillion has been activated to help households mitigate higher electricity costs.
Given Japan’s fiscal and budgetary challenges, such moves, while popular with the people, will likely keep the yen weak — something Japanese exporters may not mind too much and profit from, nor would foreign tourists.
In recent years, except for a blip during the pandemic, Japan has remained a top travel destination for many. Nonetheless, recent calls by the Chinese government to avoid travelling to Japan amid another diplomatic squabble have led to arrivals halving.
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But the market is always right
In 2022, I made the dark horse call for Japanese equities when the Nikkei was around 30,000 points. I was validated all through the middle of 2024 when the index gained by a third. However, I turned more circumspect following subsequent trips and ground sensing. Expecting the yen to weaken further, I missed out on another 50% nominal increase as the Nikkei marched to 60,000 points.
Of course, there are certain sectors or Japan-focused investment products that have outperformed the broader market, but I am happy to note that my home market bias has served me well. The Straits Times Index has ultimately given me a better total return, and minus the volatility of the Nikkei and the depreciation of the yen, to boot.
What my travels this time have shown me is that a huge dispersion in economic performance across Japanese sectors persists, driven by the impact of energy costs and the still-depreciating yen.
It is not about chasing AI stocks in Japan per se, where similar stories have unfolded in Taiwan and South Korea. Given also the increasing rotation of global institutional capital to Asia, seen in the context of toppish US markets and structurally more challenging European markets, I will stand by to buy Japan on dips.
See also: Stock open clouded by inflation alarm from bonds
Seismic moves
During this trip, the dithering surrounding negotiations, blockades and whatnot continues to seize the headlines but I am finding it easier to ignore Donald Trump and his “non-war”. The reality is that equity markets have actually got tired of Trump’s “Taco” (Trump Always Chickens Out) policy U-turns that flip and flop with every post by him on Truth Social. Thank you for your attention to this matter.
Evidently, the most affected bit has been the volatile spot market for oil. Depending on the overnight tweets from Trump, we could be paying JPY154 per litre one day, or JPY177 for our next refuel.
We did, however, feel a mild earthquake on the day we arrived, whose epicentre was approximately 70 km away in Nara. Enough for a jolt on the senses for half a minute, some mild disorientation, and I am glad it stopped there.
This seems to be the same reaction in the Straits Times Index (STI), which has largely been stuck in a groove and marching to its own beat since mid-April. Global institutions seem to be fairly sanguine, focusing more on the continued “value up” or “value unlock” taking place in Singapore, including Capital Group emerging recently as a substantial shareholder of Singapore Telecommunications, whose $80 billion market cap makes this the third largest Singapore listed company after DBS Group Holdings and Oversea-Chinese Banking Corp.
This year, the STI crossed the 5,000-point in several brief moments before giving way to shallow corrections. Nonetheless, the index remains well supported, and if the situation in the Middle East sorts itself out, thereby inspiring a convincing breakout, the JP Morgan bull case of 6,000 points is not impossible.
There are also now more frequent references in media and commentary to how Japan has already pulled off something similar in its market reset. Starting back in 2014, the country’s Government Pension Investment Fund, with an AUM estimated at around JPY 280 trillion, has been increasing allocation to domestic equities, and the effects, as we can all see, are now more apparent after several years.
Now, government policies can only do so much. Listed companies have to take more ownership. This was first raised in this column a year and a half ago when the Equities Market Review Group was convened, and also after the first “small blessing” of the $5 billion Equity Market Development Programme fund salvo was announced.
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Singapore is just one year in from rolling out the initiatives, and already, the market is cranking out from its slumber. As a much smaller market than Japan, which is the third largest in the world measured by market cap and 12 times larger than Singapore’s, the local impact has perhaps been quicker as a trickle of sustained institutional, family office flow and retail speculative confidence may be moving into a canter.
As naysayers locally slowly get converted, some are even pointing out that in 2014, the Nikkei was 16,000-17,000 points. It is almost four times higher today. When the Equity
Market Review Group was announced in August 2024, the STI was 3,400. Perhaps DBS Bank’s STI 10,000 level by 2040 projection is not unthinkable after all, and we are only halfway there.
Small is beautiful
In late April, JP Morgan emerged as a substantial shareholder in AEM Holdings with an almost 7% stake. The stock has seen a seismic increase in its share price from $2 since February to more than $7.50 now.
All this while, I figured that AEM was undervalued, and I traded in and out from time to time. However, when its market cap reached $500 million, I got out quickly and missed the big spike up. AEM is now valued at some $2.5 billion — a more than respectable local mid-cap.
I maintain a small pot for short-term and opportunistic traders, but my portfolio has a core allocation to REITs and other defensive, dividend-paying stocks. I especially like those trading well discounted to NAV, with low PE multiples or high cash relative to book. In my defence, I tried to retire five years back. I have been behaving like many investors here.
Thankfully, the opportunistic pot has served me well in recent years, as privatisations or M&A have generally provided an occasional jackpot to spice up my portfolio return. True, acquirers have not always paid full value or revalued potential value. Yet, for patient investors, such investments are still rewarding.
Privatisation plays aside, many other stocks in real estate, construction or smaller marine stocks have also enjoyed multiple re-ratings. I have not always held on and captured full value — I remain guided by conventional metrics, and I live by the truth that no one has lost money taking profit, however small.
With the increase in market activities, and revival prices of many stocks to fairer valuations — still not fair, in my view — many companies, not just REITs, have been able to raise money through placements.
In fact, placements to raise equity capital or convertible bonds to new investors, for growth initiatives, have successfully lifted the stock prices of companies with growth stories clearly articulated. These include the likes of CSE Global, iX Biopharma, Mencast Holdings and Addvalue Technologies.
Even vendor sales have been received well by the market. Info-Tech Systems, which went IPO at 87 cents last July, has since reported better earnings with better prospects seen. Perhaps that is why Peter Lee, the company’s executive chairman, was able to sell a block of more than 24.3 million shares at 94.5 cents to the likes of Avanda Investment Management, Ginkgo-AGT Global Growth Fund, ICH Synergrowth Fund, JPMorgan Asset Management and Lion Global Investors.
Similarly, Hong Leong Asia placed 50 million shares at $2.90, raising almost $150 million. Its share price has gained by around one-third since, cheered by analysts touting its growth potential riding on both the construction and data centre boom.
As equity investors in Singapore begin to discover their mojo for growth stocks, it may be worthwhile to examine the recent non-REIT listings — provided they are genuinely delivering growth and new initiatives and have not yet captured full investor attention. These include UltraGreen.ai, Coliwoo Holdings and Toku.
So too is the upcoming IPO of co-working operator JustCo, scheduled for May 22. Long in the making, the company has demonstrated true grit and resilience in surviving Covid-19, adapting and positioning itself for growth. Could this be another example of “small being beautiful” in action?
Chew Sutat retired from Singapore Exchange after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange, and he was awarded FOW’s lifetime achievement award.
