22nd May 2014 13:24
LONDON (Alliance News) - JPMorgan Japanese Investment Trust PLC Thursday said the total return to shareholders saw a decline of 9.8% over the course of the first half, compared with a fall in its benchmark of 5.9%, while total return on net assets declined 9.9%.
While Chairman Jeremy Paulson-Ellis said the underperformance against the TOPIX index during the six months ended March 31was disappointing, he noted that performance over one, three and five year periods is ahead of the benchmark.
"The underperformance of the benchmark over the six-month period was due to both asset allocation and stock selection. Turnover was low as we made few changes to the overall strategy," Nicholas Weindling, the investment manager, said in his report.
"There were two groups of stocks that hurt performance - financial stocks and internet companies. Financials, such as banks and real estate, which we see as key beneficiaries of the return of inflation to Japan, fell as some investors became disillusioned by Abenomics, particularly the pace of structural perform," Weindling said.
Japan's Prime Minister Shinzo Abe has introduced a number of measures to tackle the country's long-standing problem of declining prices, which curtails demand as consumers wait for prices to fall further before buying. The prime minister's measures, dubbed Abenomics, include fiscal stimulus, monetary easing and structural reforms.
Weindling said internet companies performed poorly around the world.
"Several of the largest detractors were stocks that had performed well over the previous year. These included Digital Garage, which invests in unlisted internet start-ups, online restaurant review and booking company Kakaku.com and Cookpad, a recipe website. All three of these companies were top contributors in the last financial year," Weindling said.
"The worst performing stock was Sanrio, which owns the Hello Kitty franchise, where growth has slowed. We do not believe the investment cases for any of these stocks have changed and continue to hold them in the portfolio. The top positive contributor was Yumeshin Holdings which is a key beneficiary of rising wages in the construction sector as demand recovers," Weindling added.
The investment manager said no significant changes have been made to the overall structure of the trust's portfolio, as it looks to take advantage from areas it thinks are primed to benefit from Abe's aggressive monetary easing, namely financials and real estate.
"Our objective remains to achieve capital growth from investments in Japanese companies by long term outperformance of the Topix benchmark. At JPMorgan we have a strong team based on the ground in Tokyo, conducting many company visits each year - around 2,500 company meetings in 2013 - in order to achieve this aim and to try to identify significant changes in sectors and companies. We expect this to be a continuing competitive advantage," Weindling said.
JPMorgan Japanese Investment Trust shares were Thursday quoted at 202.25 pence, up 1.1%.
By Samuel Agini; [email protected]; @samuelagini
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