Fidelity Japan Trust plc (LON:FJV) has published its fact sheet for the period to 31 December 2022.
Portfolio Manager Commentary
The Trust recorded NAV returns of -24.3% over the 12 months to December 2022, underperforming the reference index, which returned -4.1%. The discount to NAV widened over the same period and the Trust’s share price returned -28.1%.
Style headwinds worked against performance, as moves toward monetary tightening in the US and Europe spurred a sharp rotation into value and weighed heavily on mid/small cap growth stocks.
Holdings in software and internet services companies were among the most significant detractors. As these companies shift from investment to profit mode, however, we expect the market to reappraise them.
The Bank of Japan’s decision to widen the allowed trading band for 10 year government bonds was unexpected, with the immediate objective being to improve the functioning of the JGB market. However, financial stocks have priced in a lot of tightening recently and further appreciation in bank stocks would likely require confirmation of strong sustainable domestic wage hikes and a move toward exiting a negative interest rate policy at a time of relatively weak global economic conditions. While there have been opportunities to add oversold technology-related companies that are approaching the trough of their respective cycles, the portfolio is, on balance, bottom-up weighted towards yen strength beneficiaries such as retailers, domestic growth names and re- opening beneficiaries with strong mid-term fundamentals.
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.
