Morgan Stanley has declared in its latest report that Japan will be the top market of 2017 and advised investors to dump U.S. shares in favor of Japanese stock.
The bank says the Japanese market will be characterized by "attractive long-run valuations," "some cyclical strength" and rising earnings. Morgan Stanley Chief cross-asset analyst Andrew Sheets "next year is likely to see Japan and Europe lead the global earnings recovery." The U.S. market is set to benefit for Donald Trump's promised corporate tax cuts and increased government spending, but these changes are "unlikely to come through meaningfully until 2018."
Morgan Stanley's bullish stance marks a shift from this year, when Japan was one of the worst performing markets, with its Topix index plunging 19 percent in the first half of the year. In 2017, the Topix could surge as much as 24 percent, according to Sheets.
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