Editors' Note

Barbell strategy is the only option for Japan, China

11.24.2010

Although the relationship between the Japanese and Chinese governments is tense due to discussions over a rock in the ocean, the economic inter-dependency continues to grow day by day. China, which surpassed the U.S. as Japan’s largest export partner in 2009, accounts for 18.9% of Japan’s total exports. Likewise, Japan is China’s largest source of imports. It is also China’s second largest export destination only after the U.S. (according to JETRO data). Considerations of geological and historical relations included, there is no doubt that the two share a partnership difficult to separate.
 
This relationship is ideal for both sides from an investment strategy perspective. China as a nation climbing up to the status of economic giant is a “sexy” investment target, but is precarious in terms of stability. Japan on the other hand is a dull market in terms of GDP growth rate, but its economy and political system are stable - whoever takes the post of Prime Minister - and it holds a far greater stock of real estate than China.
 
This is the perfect combination for today’s investment industry, where a barbell strategy is popular. Barbells used in weightlifting are thick at both ends and thin in the middle. In today’s world following the financial crisis, where the phrase “middle risk, middle return” is no longer trusted, a diversified investment strategy that combines “high risk and high return financial products” with “low risk and low return financial products” in the shape of a barbell, has become mainstream.
 
That the barbell strategy between Japan and China is supported by investors has been proven by the listing of Global Logistic Properties in October. The assets of the company, created from a spin-off of ProLogis, are a combination of Japanese logistics facilities which are currently stable, and Chinese development projects. Moreover, Secured Capital Japan announced it will merge with Hong Kong’s Pacific Alliance Group and establish an investment platform that will reach across Japan and China. This does not make sense at first to us Japanese, who are not always aware of our being Asian, but this is compatible with the tendency of the U.S. and European investment industry to allocate assets in an Asia Pacific unit.
 
 
(Jun Homma)
 


[Related articles]
- Logistics facility manager GLP to raise Y240bn with listing

- Secured Capital and Pacific Alliance to form business merger

 

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