Fidelity Japan Trust PLC (LON:FJV) published its monthly factsheet for the period ended August 2024.
Portfolio Manager Commentary
Japanese equities fell for a second consecutive month in August. Key indices suffered historic losses on 5th August and corrected by more than 20% since their recent peak on 11th July. There were several key factors behind this sharp downturn, namely rising concerns about a recession in the US, unexpected hawkishness from the Bank of Japan and continued yen strength leading to an unwinding of the carry trade. By the end of the month, however, the Japanese market had recovered the bulk of the declines.
In the near term, markets are likely to remain volatile, though the absence of any material shift in domestic fundamentals suggests that Japanese stocks will remain susceptible to concerns over the US. However, once the selling has run its course, fundamentals and valuations will come back into focus. Moreover, Japan’s economic shift to moderate inflation, combined with steady progress in governance reforms, represent multi-year structural trends that are supportive of Japanese stocks over the longer term.
Looking forward, we are starting to see a bottoming out of mid/small-cap performance as rates come down and the yen strengthens, which should broaden and create headwinds for some of the yen sensitive mega caps that have led the market this year and will thus benefit the Trust’s more domestically oriented mid-cap portfolio.
Over the 12 months to 31 August 2024, the Trust recorded NAV and share price returns of 3.2% and 3.0% respectively, compared to 14.7% for the index.
