CNBC reports that BlackRock upgraded Japanese stocks, saying that earnings growth will be lifted in the second half of this year, even as its “virus dynamics” improve.

The emergence of Covid cases surrounding the Olympics held in Japan is “obviously a risk,” Thomas Taw, an investment strategist at BlackRock, said.

Japan has put Tokyo under a state of emergency till August 22 and no spectators are allowed at the games.

However, Taw pointed to conditions that favor the Japanese markets despite the heightened risks from Covid during the Olympics.

“There’s obviously a risk in terms of what happens with the Olympics,” Taw said. However, he said it was a “temporary headwind.” 

For one, valuations are “a little bit more appealing in a place like Japan,” and the country’s central bank will continue to be accommodative, Taw said. He is also positive on earnings growth for companies there.

“Over the second half of the year, I expect some money will rotate into places like Japan, and Europe, which we have upgraded to overweight.”