Japan's financial markets have a surprise upside potential compared with those of the United States and the European Union, according to Citigroup Asset Management.
Though the US and EU economies were recovering, there was a downtrend in the financial markets because of depressing long-term corporate earnings expectations, Anthony Muh Yi-tong, the regional head of investment (Asia), said.
A substantial gap was developing between economic growth expectations and equities in the US, Mr Muh said yesterday.
'It is consistent with our bullish near-term, bearish medium-term outlook, as consensus US earnings for 2002 have been upgraded but the long run outlook has worsened. This could explain the recent stock-market performance,' he said.
The valuation of US stocks had been increasing in the past decade and there were likely to be adjustments in the future. The situation also applied to the EU.
But the scenario in Japan appeared rosier as the market had adjusted to a problem that had been there for years.
