JPMorgan Japan Small Cap Growth & Income plc (LON:JSGI) has now published its April 2023 factsheet which can be found below.
Month in review
- April saw an easing of inflation momentum in the US, which supported the overall market environment.
- The portfolio underperformed the benchmark over the month. Both sector allocation and stock selection detracted from value.
From a sector perspective, not holding any stocks within food, beverage & tobacco and being overweight materials detracted most from value. At the stock level, our overweight positions in Tosho (wellness services operator) and Capcom (gaming) were the top contributors. The share price of Tosho advanced as it reported positive membership growth, with a strong forecast for the year. The share price of Capcom advanced on the back of strong business momentum. Our overweight positions in Tre Holdings (industrials) and Mimasu (semiconductors), on the other hand, detracted value.
Looking ahead
The Tokyo Stock Exchange announced that companies trading on less that 1x price-to-book ratio need to explain their remedial measures. This has resulted in an acceleration in improvements in corporate governance and balance-sheet management this year. There are signs that management teams are looking at increasing buybacks and dividend payouts. This is by far the most important thing currently happening, in our view.
Constant and broad-based wage hikes should have a positive impact on consumption and the overall Japanese economy, which has suffered from decades of deflationary trends. In April, the third round of the Shunto spring wage talks ended in agreements for an average 2.16% base-wage rise.
The consensus view is that the Bank of Japan will dismantle its yield curve control over the next few quarters, with interest rates moving closer to zero from negative territory.
Today, Japan is trading on 13 times earnings and 1.2 times book value. The combination of an improving macro and micro opportunity set and the market’s current low valuation levels has created a significant opportunity.
Targeting income without compromising on Japanese growth opportunities JPMorgan Japan Small Cap Growth & Income plc gives investors access to a diverse and fast growing sector managed by local managers. The Trust also offers a regular quarterly income without compromising on Japanese growth opportunities, by paying a higher dividend funded part by capital reserves as well as revenue returns.
