The recent slide in Japanese stock markets may provide an opportunity for local companies to increase share buybacks, UBS said in a note, adding that Japanese stocks still offer value.
Japanese stocks fell to their lowest levels in eight months on Monday, erasing all their gains this year and entering a bear market from recent record highs.
While both indices recovered some losses on Tuesday, they are still trading at levels well below their recent peaks.
Profit-taking, fears of a US recession, slowing interest rates and hawkish signals from the Bank of Japan have hit Japanese markets.
UBS claimed that the overall decline in valuations gave companies an opportunity to increase share buybacks.
The brokerage firm recommended focusing on companies with ongoing buyback programs, as well as companies that are expected to announce buybacks in the next three months.
Regarding the latter, UBS has provided a list of 14 stocks it expects to carry out buybacks soon, including: Itochu Corporation (You:), Seven & I Holdings Limited (You:), Suzuki Motor Corporation (TYO:) and Olympus Corporation (You:).
The brokerage said Japan’s planned corporate governance reforms offered greater value to investors. The Tokyo Stock Exchange passed sweeping reforms last year, including a call for companies to improve their capital positions. Most of those reforms resulted in increased buybacks.
UBS added that after the recent decline, “high-quality” stocks may be seen as undervalued.