Fidelity Japan Trust PLC (LON:FJV) published its monthly factsheet for the period ended November 2023.
Portfolio Manager Commentary
The Trust recorded NAV returns of 2.4% over the 12 months to November 2023, underperforming the reference index, which returned 8.9%. The Trust’s share price rose by 2.3% over the same period and the discount to NAV widened marginally.
Holdings in factory automation companies that faced a temporary slowdown in earnings due to supply chain disruptions and sluggish demand in China detracted from performance. However, signs of a recovery in the order cycle are emerging. The underweight exposure to traditional value areas of the market, primarily banks and automobiles, weighed on relative returns. Conversely, key active positions in technology-related cyclicals outperformed ahead of an expected bottoming of the semiconductor cycle.
In terms of investment opportunities, Japan’s technology and materials sectors hold a lot of promise. Globally competitive companies in semiconductor equipment and electronic components are trading on compelling valuations as we approach the trough of the cycle. There are also niche chemicals companies that command dominant positions in their global markets yet continue to fly under the radar. Another area of the market that we would highlight is the mid/small cap growth space, an often-overlooked segment that is trading on cheap valuations. More broadly, there is growing pressure on Japanese companies to enhance their corporate value and utilise excess cash to fund growth investments and increase shareholder returns.
