Around the World with Yusko

The Abe-san Also Rises: The Continuing Case for Japan

June 2014
Source(s): AJ W.Asahi.com, Pinterest.com
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Words of Wisdom
QQE is an open-ended program so there's no pre-set date on
how long it will last. We won't end QQE in 2015 before 2%
inflation is achieved or before such price growth is achieved in
a sustained manner.
Hikari Kuroda - BOJ
I believe a review of GPIF's asset allocation must take place as
soon as possible.
Norihisa Tamura - Health Minister
20% would not necessarily be too high a hurdle for the GPIF's
weighting of J apanese stocks.
Yasuhiro Yonezawa GPIF Chairman
The Abe-san Also Rises
Why Japan is About to Run With the Bulls
Note(s): Please note the followingmaterial reflects the opinions of Morgan Creek at the time it was written and is subject to change.
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Japan Trifecta: Political Stability, Reform & Momentum
Source(s): BNYMellon, Morgan Creek.
Commitment to Growth Plan + Ability to Think Long-Term = True Reform and Catalyst for Real Change
Monetary Stimulus + Fiscal Reform = Yen Adjustment, Profits Boom and Return of Growth and Inflation
Why Now?
Abenomics Review
6
PM Abe Has a Long-Term Plan to Restore Japan to Glory
Source(s): BNYMellon, Morgan Creek.
In Progress
7
Abenomics Report Card After Year One is Quite Strong
Source(s): BNYMellon, J apanExternal Trade Organization.
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Abenomics => Growth => Profits => Higher Equity Prices
Source(s): J apanExternal Trade Organization, Morgan Creek.
Q1
2014
Plus
6.7%
9
Abenomics Third Arrow Targeted to Have Largest Impact
Source(s): J apanExternal Trade Organization.
10
Third Arrow Plan is Comprehensive & Highly Impactful
Source(s): GS Research.
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Source(s): Strategas, GS Research, Morgan Creek.
Note(s): VAT is Value-AddedTax.
Abenomics Test: Will April VAT Tax Hike Harm Recovery?
Sales declines were not as
bad as expected, evidence
of recovery in May & June
12
Number of Key Milestones for Abenomics in 2H 2014
Source(s): GS Research.
The Continuing Case For Japan
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Japan Following DM Financial Repression Playbook
Source(s): CLSA, Morgan Creek.
Negative real yields
drove risk assets
higher in DM, will
do so in Japan now
15
Source(s): Strategas, GS Research.
Aggressive BOJ B/S Growth, But Lags Peers (Will Continue)
16
Corp Profits Hitting Record Highs Despite Yen Strength
Source(s): CLSA.
17
Targeting Nominal GDP Today, Will Follow Profit Growth
Source(s): BNYMellon, CLSA.
18
Source(s): Strategas.
Rising Orders & Corporate Profits => Increasing GDP
19
Asset Deflation Was Huge, Land/Housing Finally Turning
Source(s): CLSA, GS Research.
20
Abenomics Impacting Job Market, Wages Finally Rising
Source(s): GS Research.
21
Huge Liquidity Base in Japan About to be Unleashed
Source(s): BNYMellon.
22
Japan is Huge Market, Equivalent to Eight Other DMs!
Source(s): J apanExternal Trade Organization.
23
Japan Opportunity is Really Play on Global Trade/Growth
Source(s): J apanExternal Trade Organization.
24
Japan Focus on R&D Leads to Innovation, Opportunities
Source(s): J apanExternal Trade Organization.
Why Buy Japanese Equities Now?
26
Equity Valuations Havent Kept Pace w/ Abenomics Gains
Source(s): BNYMellon.
27
Japan Growth in EPS, Not Multiple, So Still Cheapest DM
Source(s): Blackrock.
28
Source(s): RMBAsset Management.
Japanese Equity Prices Not Kept Pace with EPS Growth
29
Rising ROEs & Profits Drive Prices Higher, P/Es Lower
Source(s): GS Research, Morgan Creek.
Would Be +40% Return Over 7 Qtrs
30
Japanese Equities Very Cheap on CAPE & P/B Measures
Source(s): VectorGrader.com.
31
Japan Equities Very Cheap vs Forward EPS & EV/EBITDA
Source(s): CLSA.
32
Japanese Equity Valuations Very Attractive vs. Peer DMs
Source(s): GS Research.
33
Foreign Investors Drove Markets Up in 13, Down in 14
Source(s): GS Research.
34
Japan Markets Dominated by Foreign $, About to Change
Source(s): CLSA.
35
$1.3T GPIF Set to Expand Equity Allocation, Tailwind I
Source(s): The Economist, Wall Street Journal.
36
Japanese Households Buy Equities (NISA), Tailwind II
Source(s): TopForeignStocks.com.
37
Global Investors Still Substantially Underweight Japan
Source(s): GS Research.
38
Bull Mkts Grow on Skepticism: Few Longs, Heavy Shorts
Source(s): GS Research.
39
Big Equity Rallies NOT Always Related to Yen Weakness
Source(s): GS Research.
40
Strong EPS Growth Leading to Shareholder Cash Return
Source(s): GS Research.
41
Source(s): BigCharts.com.
Japan Closing Gap w/ Global Equities in Recent Weeks
42
Sun Has Barely Risen Over Horizon, Long Day Ahead
Source(s): BNYMellon.
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Contact Information
Morgan Creek Capital Management, LLC
301 W. Barbee Chapel Road, Suite 200
Chapel Hill, NC 27517
Contact:
Andrea Szigethy
Phone: (919) 869-8077
Email: aszigethy@morgancreekcap.com
Web: www.morgancreekcap.com
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Investment objectives are not projections of expected performance or guarantees of anticipated investment results. Actual performance and results may vary substantially fromthe
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Real Estate (TOPIX) Index -- The TOPIX Real Estate Index is a capitalization-weighted index designed to measure the performance of the real estate sector of the TOPIX Index
(TPX). The benchmark was developed with a base value of 100 as of J anuary 4, 1968. The parent index is TPX.
S&P 500 Index (SPX) -- This is an index consisting of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The index is a market-value weighted
index each stocks weight in the index is proportionate to its market value. Definition is fromStandard and Poors.
BOJ refers to Bank of J apan.
Nikkei-225 Index -- This is an index consisting of the price-weighted average of 225 top-rated J apanese companies listed in the First Section of the Tokyo Stock Exchange. The
Nikkei Stock Average was first published on May 16, 1949, where the average price was Yen176.21 with a divisor of 225.
MSCI World Index -- this is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets. The MSCI
World Index currently consists of 24 developed market country indices. Morgan Stanley Capital International definition is fromMorgan Stanley.
MSCI Emerging Markets Index -- this is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI
Emerging Markets Index currently consists of 21 emerging market country indices.
MSCI Japan Index -- this is a free float-adjusted market capitalization index that is designed to measure J apan market equity performance.
Price-To-Earnings Ratio - P/E Ratio: The price-to-earnings ratio, or PE ratio, A valuation ratio of a company's current share price compared to its per-share earnings. Also
sometimes known as price multiple or earnings multiple. Definition is fromInvestopedia.
Important Disclosures
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