Fidelity Japan Trust PLC (LON:FJV) aims to achieve long term capital growth by investing predominantly in equities and their related securities of Japanese companies. The trust has now issued its Monthly Factsheet as of the 30th June 2023.
Portfolio Manager Commentary
The Trust recorded NAV returns of 16.7% over the 12 months to June 2023, outperforming the reference index, which returned 12.9%. The Trust’s share price rose by 14.8% over the same period and the discount to NAV widened marginally.
Positive stock picking in the electric appliances, information & communications sectors was the primary driver of the Trust’s outperformance over the period. Key active positions in technology related cyclicals started to perform ahead of an expected bottoming of the semiconductor cycle, while selected SaaS companies regained lost ground. Reopening names and under covered small caps also added value. Conversely, holdings in manufacturers that faced a temporary slowdown in earnings due to supply chain disruptions and procurement difficulties detracted from performance.
Japan’s delayed reopening and the return of inbound tourists are driving growth in consumption and services demand. At the same time, the economy is transitioning to a moderately inflationary state as companies are finding it easier to raise prices and are increasing wages. There is growing pressure on firms to enhance their corporate value and utilise excess cash to fund growth investments and shareholder returns. While signs of weakness in China’s recovery and the risk of a US recession represent potential headwinds that could prompt a near-term adjustment, this accumulation of positive factors is supportive of the mid-to-long term outlook for the Japanese market.
Fidelity Japan Trust PLC seeks to add value through detailed research. Fidelity’s proprietary research forms the cornerstone of the investment process and drives the Trust manager’s bottom-up stock selection approach. He works closely with sector analysts, as well as our dedicated small-cap analysts, and is also able to call upon Fidelity’s global research network. The portfolio manager favours companies with superior mid- to long-term earnings growth potential, competent management focused on raising shareholder returns and attractive absolute and relative valuations. The manager also assesses the following: business strategies; technical and/or operational advantages; competitive position. While the trust is free to invest across a wide range of industries, sector allocation is a direct result of the manager’s bottom-up stock selection.
