Credit Suisse Research Weekly Asia US recovery and peaking JPY bodes well for the Nikkei 225

Highlights
􀂃 The macro economic picture in Japan and the US has become more constructive and corporate earnings have proved resilient.
􀂃 The risks of significant JPY strength, which weighed on Japanese equities in 2010, have receded and the shift in foreign investors' sentiment toward Japanese equities has improved the demand and supply situation for Japanese equities.
􀂃 Valuation of Japanese equities remains compelling versus historical average and technical outlook has improved.
􀂃 We upgraded our 12–month Nikkei 225 target to 12,000. Investors should focus Japanese exporters and interest ratesensitive companies.

Top investment ideas
We recommend investors BUY Japanese exporters that benefit from the recovery in the US economy and interest rate-sensitive companies that benefit from the Japanese government's reflationary policy.

Exporters: Toyota (7203 JP, BUY), Honda (7267 JP, BUY), Nidec (6594 JP, BUY), Toshiba (6502 JP, BUY)

Interest rate-sensitive companies: Mitsui Fudosan (8801 JP, BUY), Sumitomo Mitsui Financial Group (8316
JP, BUY), Nomura (8604 JP, BUY)

Europe: BUY ING (INGA NA) A compelling longer-term restructuring story

Improved outlook for Japanese equities in 2011
Japanese equities have lagged the other major stock markets substantially since the Lehman shock. However, the macro economic picture in Japan and the US has become more constructive since Q4 2010 and corporate earnings have proved resilient. The risk of a significant JPY strength, which weighed on Japanese equities in 2010, has receded and the change in foreign investors' sentiment toward Japanese equities has improved the demand and supply situation for these equities. Nevertheless, the valuation of Japanese
equities remains compelling compared to the historical average while technical outlook for the Japanese market has improved. Our investment stance on Japanese equities is now turning more positive for the next 1–6 months.