Fidelity Japan Trust PLC (LON:FJV) published its monthly factsheet for the period ended March 2024.
Portfolio Manager Commentary
The Trust recorded NAV returns of 3.7% over the 12 months to March 2024, underperforming the reference index, which returned 21.7%. The Trust’s share price rose by 3.4% over the same period and the discount to NAV widened.
While the Japanese market has recorded historical gains, significant style divergences have persisted. The US bond yield cycle and accompanying currency trends have exerted a sizeable impact on style returns. These trends have generated performance headwinds, particularly during periods of sharp rises in long-term rates. Against this backdrop, the underweight exposure to value areas of the market have weighed on relative returns. Holdings in machinery companies that faced a slowdown in earnings due to sluggish demand in China also detracted from performance. Conversely, key positions in technology-related cyclicals outperformed and holdings in differentiated small caps added value.
A peaking out of the interest rate cycle in the US is conducive to better performance by growth stocks, an area of the market where we are seeing a lot of undervaluation. Signs of improvement in the global manufacturing cycle are supportive of technology and factory automation stocks. More broadly, we are finding opportunities in typical largecap sectors, where companies are moving from value to growth. Furthermore, TSE-led governance reforms are broadening out across the market, and we are seeing growth and mid-cap companies become more active in terms of shareholder returns.
Fidelity Japan Trust PLC (LON:FJV) aims to be the key investment of choice for those seeking Japanese companies exposure. The Trust has a ‘growth at reasonable price’ (GARP) investment style and approach – which involves identifying companies whose growth prospects are being under-appreciated or are not fully recognised by other investors.
