Japan hedge fund sees Trump’s policies boosting Topix by 15%

Bloomberg

Toshihiro Hirao, whose Japan hedge fund posted its biggest decline ever last year, sees relief ahead as he expects President Donald Trump’s policies to boost Japanese equities by the most in three years.
Hirao, 52, who runs the Asuka Japanese Equity Long Short Strategy in Tokyo, is predicting that Trump’s pro-business agenda will help strengthen the dollar, stoking a 15 percent increase in the Topix index this year. Despite a tumultuous start, the US president will soon turn to his plan of tax cuts and infrastructure spending, Hirao said. That will help Japanese industrial machinery and automation companies as well as those with US businesses, which are also benefiting from a weaker yen, he said. Hirao, chief investment officer of the $220 million Asuka Asset Management Co., is investing in Okuma Corp., Keyence Corp., SMC Corp. and Fanuc Corp., manufacturing and factory automation stocks that he says are poised to benefit from increased US infrastructure spending. Shin-Etsu Chemical Co., a producer of synthetic resins, and steel manufacturer Yamato Kogyo Co., stand to gain from a weaker Japanese currency, Hirao said.
“Trump will eventually adjust himself. I am rather optimistic,” said Hirao. “What we are likely to see as results will be tax cuts, infrastructure investment and job creation. The US economy is doing very well at the moment. We will see a further improvement.”
Hirao’s optimism about Trump puts him at odds with hedge fund giants George Soros, who said in January that the stock market rally will come to a halt, and Ray Dalio, who is concerned the damaging effects of Trump’s protectionist policies may overwhelm the benefits of his business-friendly agenda. So far, Hirao’s belief appears well-placed — US stocks have hit record highs the past month as the Topix has advanced to the highest levels in more than a year. The dollar has strengthened 7 percent against the yen since Trump’s election in November.
Trump in his first address to a joint session of Congress on Tuesday said he would ask for $1 trillion in infrastructure spending to replace new roads, bridges, tunnels, airports and railways. His speech also included a reference to a plan that would overhaul corporate and individual taxes, although he didn’t provide details.
Hirao’s Asuka Japanese Equity Long Short Strategy had an 8 percent annualized return on average over the past five years. The fund fell 6.2 percent last year as central bank purchases and unpredictable political events such as Brexit hurt long and short positions in the portfolio. Declines in 2016 exceeded the 0.7 percent loss in 2008, when the global financial crisis sent stocks worldwide plunging. The Topix fell 1.9 percent last year, with a measure of volatility reaching the highest level since 2008.