JPMorgan Japan Income fund JSGI – improved corporate earnings & governance in July review

JPMorgan Japan Small Cap Growth & Income plc (LON:JSGI) published their ‘month in review’ for July 2021. 

The Portfolio Manager, Eiji Saito, commented:

Month in review

“The Japanese market declined in July, with the TOPIX returning -2.2% in JPY terms. Covid-19 cases continued to rise in Japan, with Tokyo entering a fourth state of emergency, which weighed heavily on market sentiment.

The trust underperformed the benchmark over the month. Both sector allocation and stock selection detracted value.

At the sector level, overweighting the software sector and underweighting the real estate sectors detracted value.

At the stock level, our overweight positions in BASE (business platform provider) and (cloud signature) detracted value as the share prices suffered from profit taking. Our overweight positions in COSMOS Pharmaceutical (pharmacy), on the other hand, outperformed and added value. We made no changes in our investment strategy or in the portfolio.”

Looking ahead

Eiji noted, “while Covid-19 has continued to weigh on economic activity, corporate earnings are visibly recovering.

On the ground in Japan, Covid-19 has been accelerating the structural changes that were already taking place, especially in the area of automation and information technologies. The trends provide many interesting investment opportunities for bottom-up investors, benefiting from the structural changes taking place in the country. Digitalisation is one of the structural changes that we have been seeing as a positive development and growth area.

While the popularity of Prime Minister Suga is falling, and there is due to be an election later this year, the political situation is likely to remain stable as there is no credible opposition to the ruling Liberal Democratic Party (LDP). The government has announced its commitment to net carbon zero emissions by 2050, and we are looking for Japanese companies that will benefit from this trend.

We expect improvements in corporate governance to continue. The corporate governance story continues to develop and this increasingly looks structural in nature. It is important to note that over 50% of Japanese companies have net cash positions. This is a significantly higher percentage than companies in Europe and the US.”

Japan income fund, JPMorgan Japan Small Cap Growth & Income plc (LON:JSGI / JSGI.L), targets Japan income without compromising on Japanese growth opportunities. This Japan fund is an income investing opportunity that gives investors access to a diverse and fast growing sector managed by local managers. The Investment Trust offers a regular quarterly income by paying a higher dividend funded part by capital reserves as well as revenue returns.

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