JP Morgan Japanese Investment Trust opened new positions in a range of companies over the six months to 31 March 2023 as the trust’s performance improved following a tough 2022.
Over the period, the trust mirrored its Topix index benchmark, both returning 8.5%.
According to its factsheet, net asset value fell 27.89% in 2022, while the Topix index dropped 4.54%.
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However, for the quarter to the end of May the firm said relative performance had “begun to recover”, rising 3.1% compared to the index’s 2.0%.
Taking a longer term view, JP Morgan Japanese has outperformed with an annualised return of 10.2% over the last decade, against the benchmark’s return of 7.3%.
Among a range of changes to its portfolio, the trust opened new positions in convenience store operator Seven & I and household products provider Unicharm over the six months to 31 March.
Outgoing chair Christopher Samuel said: “We also purchased I-NE, a new and disruptive player in cosmetic and beauty products sector, Seiko, which is increasing its focus on high-end watches, Sosei, a biotech company with several promising drugs on license to major pharmaceutical companies, and Japan Material, a company that is generating high recurring revenues by providing low-cost services to semiconductor plants.”
Samuel added the trust funded purchases through the outright sale of a number of its holdings, the largest being Yamashin Filter. He said the execution of the firm’s business plan had been “poor for some time”.
Annualised portfolio turnover in the period was 19.5%, with an average holding period of around five years.
Era of deflation could be over
Looking ahead, Samuel said the trust is encouraged by rising inflation which provides hope that Japan may have finally overcome the long era of deflation. Japanese inflation hit a 42-year high in February of 4.2%.
Samuel said: “Another key factor supporting our favourable view on Japanese equities is that the country is undergoing major technological transformation. Businesses and government are increasing their efforts to digitalise and automate their processes and administrative procedures, creating the potential for significant growth and productivity gains over the medium term. This should prove a very supportive environment for the dynamic, quality growth businesses in which we invest.
“The Japanese market continues to offer many opportunities to invest in innovative, interesting companies at the heart of Japan’s new growth, at attractive valuations. We believe that we are especially well-placed to capitalise on these opportunities, thanks to our active investment approach and our large, Tokyo-based research team. We remain confident that our investment approach will ensure the company continues to deliver absolute gains and outperformance to its shareholders over the long term.”
In the half-year results, the trust confirmed it has retained its ‘Gold’ Morningstar Analyst rating.
