BlueBay, Graham among hedge funds spotting Japan trades
By Nell Mackenzie, Carolina Mandl and Summer Zhen
LONDON (Reuters) -The Bank of Japan, long the outlier as other major economies jacked up interest rates to curb inflation, is expected to end its negative interest rate policy soon.
Inflation has exceeded 2% for well over a year and markets anticipate a BOJ shift by April. But uncertainty is high and BOJ Governor Kazuo Ueda said last week it was too early to conclude inflation was close to sustainably meeting its target.
Japan's Nikkei has been rising — it breached 40,000 for the first time on Monday after five straight weeks of gains. And the economic picture has been brightening — an upbeat economic report has suggested Japan might not have gone into recession last year after all.
Four hedge funds shared four ideas on how to trade Japan. Their views do not represent recommendations or trading positions, which they cannot reveal for regulatory reasons.
1/ GRAHAM CAPITAL MANAGEMENT
* Systematic and actively managed macroeconomic funds
* Size: $18 billion
* Founded in 1994
* Key trade: Long Japanese stocks, particularly banks
Graham CIO Pablo Calderini favors mainly Japan's banks stocks as the BOJ is likely to normalize policy.
Banks are particularly likely to benefit from a steeper yield curve, where longer-dated bonds yield significantly more than shorter-dated ones, said Calderini.
Banks borrow in the short term and lend in the long term, at higher rates. «Japan's monetary policy has been a headwind for banks and it will become a tailwind,» he said.
An index of Japanese bank stocks is up 16% so far this year, broadly in line with the blue-chip Nikkei.
2/ BLUEBAY ASSET MANAGEMENT
* Macro economic fund
* Size: part of the $432 billion RBC Global Asset Management
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