Japan's the Way to Play Emerging Markets: Wilbur Ross
Special to CNBC.com
Japan, the third-largest economy in the world, is a "very good and very cheap way" to invest in emerging markets, investor Wilbur Ross told CNBC Monday.
The majority of Japanese companies export to China and other emerging markets," the chairman of WL Ross & Co. told CNBC, and many Japanese companies frequently have emerging-market subsidiaries.
The companies listed in Japan are trading around book value, with "no going-concern value [and] no goodwill attached to Japan Incorporated," he said.
Also, thanks to a strong yen, these companies are "generating a lot of cash flow," Ross said — six trillion yen net cash flow in the last year.
"This has been going on for quite a while. Forty-five percent of all the listed companies in Japan have more cash than they have debt," Ross pointed out. "There’s no other market in the whole world that’s as liquid in terms of the individual companies as Japan."
These companies will now be using their cash to make acquisitions outside Japan, particularly in the emerging markets, he added.
He called Thursday's euro-zone deal on Greece, which forced European banks to shore up capital while taking a 50 percent hit on their Greek bonds "a necessary first step" that didn't solve anything.
"I am very concerned that [European leaders are] setting a bad precedent," he said. "Greece has clearly not lived up to anything that it was supposed to do. Instead of punishing them for that, they’re giving them a pretty good deal with the existing bondholders than they had before."
He said MF Global's problems are "an unfortunate thing" but a "small, tiny blip on the radar screen. It’s not the end of the earth for the economy or for Europe."
Little players like MF Global won't cause "a big domino effect," he said. "I would be looking more at the European banks themselves" because he thinks they'll need even more capital than what they are now mandated to have if Italy or Spain come calling for help.
