TOPIX TP 1,700reiterated:Our top stock recommendations

Strategy.

Last week we increased our 12-month TOPIX TP to 1,700 (from 1,590) based on16.0x (15.0x) our TOPIX estimated EPS to 9/2018 of 106 (unchanged). Thisfollowed reports looking at the cycle and valuation.

In addition to the global industrial recovery earnings-momentum Bull marketstory, we believe there is now also a shareholder return story. Yesterday’s reportfocussed on industrial recovery companies in particular.

A Trump Presidency reinforces our Bullish conviction. The first of two keytakeaways for Japan is the Republican Party emphasis on growth, which throughwidening 10-year bond spreads (the US versus Japan) enables an easierrecycling of Japan’s current account surplus. The risk of a further strengtheningof the Yen is greatly reduced. The 9 November 2016 Macq-ro insights: Trumpand the long durable expansion has more on the macro framework.

Japan and Russia are progressing slowly towards a Peace and EconomicCooperation treaty. This could lead to very large FDI flows into the Russian FarEast and related Japanese industrial exports in return for greater energy securitythrough diversifying energy supplies. It is possible that a Trump presidency couldencourage such deal-making, our second key takeaway. Please see the27 October 2016 Japan and Russia: Investment opportunities.