Japanese Yen Could Easily Strengthen Further, Which Isn’t All Bad For Stocks by Eric Bush, CFA – Gavekal Capital Blog
During 2015 the yen became undervalued compared to the dollar on a purchasing power parity basis to an extent that it had never reached over the past 30 years. On June 5th, based on our PPP cpi differential model, the yen was a remarkable 32% undervalued compared to the dollar. The recent strengthening has improved how undervalued the yen is compared to the dollar but at 22.39% undervalued, the yen has much more room to run. Also, the yen isn’t just undervalued against the dollar either. On a PPP basis, the yen is 7% undervalued against the euro and 13% undervalued against the Canadian dollar.
Corsair Capital was down by about 3.5% net for the third quarter, bringing its year-to-date return to 13.3% net. Corsair Select lost 9.1% net, bringing its year-to-date performance to 15.3% net. The HFRI – EHI was down 0.5% for the third quarter but is up 11.5% year to date, while the S&P 500 returned 0.6% Read More
Japanese Yen vs U.S. Dollar
To most investors, the idea that the yen could gain by 20% against the dollar and still be considered slightly undervalued is the final nail in the coffin for Japanese equities. It is generally believed that a stronger yen is terrible for Japanese stocks and foreign investors have been acting on this common belief. However, developed market Asian counter-cyclicals, especially growth counter-cyclicals, have actually tended to outperform other developed market equities in a strengthening yen environment over the past 15 years.