Gavekal Capital: Leadership in Japanese Counter-Cyclicals

Thursday, August 21, 2014

Leadership in Japanese Counter-Cyclicals

In our last quarterly video (link here) we argued that counter-cyclical stocks in Asia are attractive.  Counter-cyclical stocks are those in the utility, telecom, consumer staples and health care sectors of the MSCI Asia-Pacific index.  Slicing that a little finer, we recommended focusing attention on the growth counter-cyclical components of Asia, Japan in particular.  Growth counter-cyclicals are companies in the consumer staples and health care sectors.

So far this month, ironically as the Yen has weakened some--which usually benefits more cyclically oriented sectors--these growth counter-cyclical companies have been the best performers in Japan.  In the table below, we show performance of our equal-weighted grouping of companies in the MSCI Japan index. Consumer staples and health care are the first and second best performers, with utilities the third best performing sector.  Three out of four ain't bad...

Performance of MSCI Japan Index