In Japan’s equity market, cyclical stocks have long been the dominant players, attracting significant investment. Major sectors such as industrial and consumer discretionary make up 40.8% of the MSCI Japan index, meaning these cyclical businesses receive substantial attention due to their large market share. However, their performance is often highly sensitive to economic cycles.
The recent rally in Japan’s market has been led by cyclical stocks in areas like sea transportation, mining, insurance, and banking, which saw returns of 277%, 200%, 125%, and 120%, respectively, over the past three years. Despite this impressive growth, some investors now expect a shift, with growth stocks potentially taking a more prominent role as market conditions evolve.
While cyclical leaders have historically dominated, growth stocks are expected to take centre stage as Japan’s market continues to develop, potentially broadening the range of opportunities for investors.
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.
