JPMorgan Japan Small Cap Growth & Income plc (LON:JSGI) Non-executive chairman, Alexa Henderson, recently commented:
‘With the ISA season ahead, I’m conscious investors may not typically look to Japanese Equities as an option. However, JPMorgan Japan Small Cap Growth & Income (JSGI) has a predictable dividend due to the dividend policy introduced in 2018. That is to say that ‘the company pays dividends equivalent to 1% of NAV per quarter.’
Whilst the performance of the company since the summer of 2021 has been difficult, from the low point in June 2022 the NAV has started to move ahead again. If we consider that Japan only lifted strict border controls in October last year, many activities such as consumption and travel remain well below pre-Covid levels and finally look set to normalise. This in combination with many structural improvements in corporate governance looks to have created a significant investment opportunity.”
JSGI’s dividend performance table below shows the total dividend paid in 2022 was 20.30 pence per share.
Source: J.P.Morgan Asset Management website
In a recent company update as of 28/2/2023, JPMorgan commented on the improving macro- and microeconomic outlook.
Japan only lifted strict border controls in October 2022, since which time tourist numbers have started to rebound. A further relaxation of Covid-related guidance has been announced in February, including the relaxation of mask-wearing guidelines from 13th March and an easing of strict border restrictions on passengers travelling from China starting 1st March. Many activities, such as consumption and travel, which remained well below pre-Covid levels last year, are finally starting to normalise.
On February 14, the Japanese government officially proposed its plan to the Diet to nominate Kazuo Ueda as the next Bank of Japan (BoJ) governor in early April this year. While further adjustments to yield curve control (YCC) is possible, the bar for the BoJ entering a rate-hike cycle is likely to be high during 2023.
Japanese nominal wage data should be watched closely for any evidence that inflationary pressures are not just imported. Constant and broad-based wage hikes should have a positive impact on consumption and the overall Japanese economy, which suffered from decades of deflationary trends.
Today Japan is trading on 13 times earnings and 1.2 times book value. The combination of an improving macroeconomic and microeconomic opportunity set aligned with the market’s current low valuation levels has created a significant opportunity.
JPMorgan Japan Small Cap Growth & Income Investment Trust (LON: JSGI) is actively managed by a Tokyo-based investment team and provides access to the innovative and fast-growing small and medium-sized companies that are at the core of the Japanese economy, while paying a regular quarterly income.
