December 21, 2013 2:08 am JST

Auto, real estate, bank stocks seen as winners in 2014

TOKYO -- With a continuous flow of easy money in Japan expected to keep the yen weak, investors see automotive, bank and real estate shares reaping the benefits next year.

     In a policy meeting that ended Wednesday, the U.S. Federal Reserve decided to scale back its monthly bond purchases but suggested that interest rates would be kept at effectively zero for some time to come. The market largely welcomed the decision, with many saying it cleared up some of the uncertainty surrounding the Fed's policy.

     The Bank of Japan, meanwhile, decided to maintain its aggressive easing measures in a policy meeting that wrapped up Friday. With the consumption tax slated to rise in April, market players increasingly expect the BOJ to take additional steps to prevent an economic decline.

     Asked what to watch next year, many institutional investors point to automotive stocks. "The tapering of monetary easing in the U.S. is a sign that its economy is recovering," says Soichiro Monji, chief strategist at Daiwa SB Investments. "Automotive stocks will benefit the most from an improving U.S. economy and a weak yen."

     Many expect businesses exporting to the U.S. to add to their capital expenditures, boosting stocks in the machinery and electrical equipment sectors. Some contend that heavier capital spending will increase demand for funds. "Business lending will probably grow, putting banks in the spotlight," says Satoru Asatani of Shinko Asset management.

     Additional easing measures from the BOJ may further heighten expectations that Japan will shake off deflation once and for all. "More investors will move their funds into real estate stocks to avoid risks from price increases," predicts Yoshihisa Okamoto of Mizuho Asset Management. Some foresee sales of big-ticket items and durable goods picking up, increasing interest in department store and home appliance retailer stocks.

     Meanwhile, many investors cite emerging economies as a possible risk factor. "If countries worried about weak currencies are forced to further hike interest rates," Monji says, "the negative economic impact may spread."

     Some warn that if U.S. long-term interest rates rise significantly from a retreat from monetary easing, markets could switch to risk-off mode, triggering a shift in investment money.