Fidelity Japan Trust PLC (LON:FJV) published its monthly factsheet for the period ended December 2024.
Portfolio Manager Commentary
The Japanese equity market rebounded in December, fuelled by strong gains in largecap value stocks, and the Nikkei Stock Average reached its highest ever year-end close. Economic indicators came in stronger than expected and the yen weakened as interest rate expectations waned. Against this backdrop, global cyclicals generated the strongest returns. Automobile stocks, which had faced concerns over tariffs from incoming US President Donald Trump, rebounded strongly on news of merger talks between Honda Motor and Nissan Motor, as well as Toyota Motor’s goal of reaching a 20% return on equity. Conversely, defensive sectors such as utilities and consumer staples were relative laggards.
For the first time in three years, the outlook for corporate earnings is less dependent on currency factors and there is the potential for domestic mid-caps to perform. This segment of the market has seen valuation multiples compress to historical lows. Meanwhile, Japan-specific drivers, such as domestic reflation and rising wages, and TSE-led governance reforms represent multi-year structural trends that are creating new investment ideas. The initial governance charge was led by low price-to-book companies – while most of the low hanging fruit has been harvested, we see greater potential for change among mid-caps and sustainable growth companies.
Over the 12 months to 31 December 2024, the Trust recorded NAV and share price returns of -1.8% and -5.7% respectively, compared to 10.0% for the index.
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.
