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Investors should use the latest bout of market turmoil to accumulate stocks in the Japanese stock market, according to Peter Oppenheimer, the chief global equities strategist at Goldman Sachs.
Plagued by low inflation for decades, Japan's economy is now seeing improvement for the first time since the 1980s, Oppenheimer told CNBC Tuesday. This, he said, meant that the attractiveness of equity valuations in the Asian country contrasted with their American counterparts.
"Valuations are not that extreme there (in Japan), so I think you've got the combination of a tailwind from policy and from the currency - but actually some real fundamental improvements from corporate profitability," he said.
Japan's benchmark Nikkei 225 index hasn't been immune from the equity turmoil seen in China. The index finished nearly 4 percent lower on Tuesday after weak manufacturing data out of China. Still, the Nikkei is up about 4 percent in year-to-date terms, while on Wall Street, the S&P 500 is down just over 4 percent this year.
Domestic data out of Japan Tuesday showed corporate capital expenditure increased by 5.6 percent in April-June from a year ago. This, however, was a slowing from the figure from the previous quarter.
But this sort of weakness is exactly the opportunity that investors should be taking advantage of, according to the Goldman Sachs' strategist, who added that he was still favoring European equities on a medium-term basis, too.
"From an equity market perspective, we're looking at relatively flat returns and still some high volatility in the near term but I should be clear, if we take a 6 or 12 month view, we think you're going to see some pretty good progress in equity markets. And over that horizon we would see the best returns in Europe and Japan," he said.
"That's where the valuations are the most supportive and we've still got a reasonable improvement in profitability. And it's in those markets, I think, people should be looking to accumulate into volatility weakness in the near term."
Nomura's widely-watched strategist, Bob Janjuah, added that central bank policy could also support equities in Japan. He told CNBC that he expected the Bank of Japan (BoJ) to "go again" and produce another round of quantitative easing (QE) to combat global deflation concerns.
The Japanese yen has depreciated significantly against the dollar on the back of previous QE programs from the BoJ and was trading at around 119.91 against the greenback on Tuesday morning.
Oppenheimer expects the currency pair could even have push to 130 at some point next year, with the yen weakening further and providing a further boon to Japanese exporters.