Japan leads IT performance in 2013

Japanese trusts have dominated performance in the closed-end space throughout the year with discounts narrowing leading to a rerating of the sector.

Japan leads IT performance in 2013


Macau Property Opportunities was the top-performing investment company in 2013, up 85%, while Baillie Gifford Japan was up 80%. This compares with the average investment company which rose 16% over 12 months in share price terms.

According to the Association of Investment Companies, both the Japan and Japanese Smaller Companies sectors were currently at a discount of -5% compared to 12% a year ago, which it is calling a “significant rerating”.

John MacDougall, manager of Baillie Gifford Shin Nippon, which sits in the Japanese Smaller Companies sector, attributed the success to the Abe administration and its commitment to shifting the country away from its ‘lost decade’ and praised its clarity of vision.

“There appears to be a uniformity of purpose and support across political executive and legislative bodies as well as amongst corporate Japan and individuals.  The Japanese yen has weakened and the consumer and corporate sectors are showing signs of buoyancy,” he said.

MacDougall said the aggressive monetary policies had been felt by corporate Japan and affected sentiment among individuals, yet structural reform would take longer to implement, with its effects not felt for “a number of years”.

He said major reform areas would include economic partnerships, the labour market, the promotion of private finance initiatives and public private partnerships, special business and enterprise zones, education and the promotion of tourism.

“Should even some of these measures come to fruition, Abe’s 3-4% nominal growth rate should be achieved and corporate Japan will be in a much healthier position too. The next few years will produce plenty of opportunities to invest in dynamic and entrepreneurial innovative companies in Japan.”

The AIC said the Japan sector delivered 151.13% over one year and 157.51% over three years while Japanese Smaller Companies returned 143.64% and 165.33% over three years.

Annabel Brodie-Smith, AIC communications director, added: “It’s been a great year for investment companies, with strong overall performance, a record high of assets under management at £112bn, and discounts narrowing to just -5%, their lowest level in over seven years.

“Japanese investment companies have at long last benefited from a new dawn, with the Abe administration bringing increased optimism to the region.”


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