JAPANESE EQUITY
SECTOR ANALYSIS
Three-year sector performance
The Japan small/mid-Cap sector outperformed that of the broader Japan equity
sector over the three-year period. It was
not surprising to see that most small-cap
funds ranked toward the top end of the
table. However, the top performing fund,
JPMorgan Japan (Yen), is an all-cap fund
with a bias toward smaller companies.
The fund has benefited from making some
timely calls in leveraging its exposure when
the market rallied. Japanese small/midcaps have long been an under-researched
segment and remain the hunting ground
for stockpickers.
MARKET REVIEW
In 2013, Japanese equities posted solid gains
alongside developed market equities. The
market was supported by Prime Minister
Abe’s initiatives to boost growth via monetary
policy, fiscal stimulus and corporate
reforms. This uptrend was interrupted in
April 2014 when a consumption tax hike
was implemented, but since then equities
have gradually resumed an uptrend due
mainly to the continued monetary easing
and an increased inflow from domestic
institutional investors. In the second half
of 2015, Japanese equities slipped again
following a deteriorating outlook for China.
As global investors moved back toward safe
assets, capital began to flow into the yen and
interrupted what had been a falling trend for
the currency.
Source: FE Analytics (31 Mar ’13 to 31 Mar ’16)
Three-year annualised return/volatility
MARKET OUTLOOK
Valuations of Japanese equities remain
attractive against those in the major
developed markets. The market should
continue to benefit from an accommodative
monetary policy and lower oil and
commodity prices. Overall, the consensus
among fund managers is that they do see
some thematic opportunities emerging
from Japan, including factory automation,
domestic consumption as well as businesses
set to benefit from rising Chinese tourism.
Provided by FE Advisory Asia as of 31 May ’16
Source: FE Analytics (31 Mar ’13 to 31 Mar ’16)
For professional investors only
Fund Selector Asia Fund Insights Directory 2016
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