INVESTING SHOW: Is Japan a golden opportunity for investors in the coronavirus storm?
When the coronavirus closed economies around the world, Japan stood out as one of the countries that managed to avoid a hard lockdown.
It was feared that Japan and its elderly population would suffer severely from the coronavirus pandemic, but deaths were low and cash-rich companies proved robust.
The Japanese economy has taken a hit, but Nicholas Weindling, manager of the JP Morgan Japanese Investment Trust, says the country has not been hit as hard as many people thought it would be.
Does this mean that the Land of the Rising Sun – considered the Land of False Dawn by many investors – offers an opportunity for investors in the Coronavirus storm?
Based in Tokyo, Nicholas joins Simon Lambert and Richard Hunter in this episode of the Investing Show to discuss how Japan has passed Covid-19 and where he sees long-term prospects for growth in the stock market.
The fund manager argues that while many investors will think of Japanese big name companies as they consider the country, these are not the opportunities to take advantage.
Instead, he says the companies that are further up the scale are leveraging the Japanese consumer economy and helping fellow companies adapt to the digital world can deliver returns.
He says, “We are investing in great companies located in Japan, not in the Japanese market itself.”
JP Morgan Japanese Investment Trust
Ongoing charges: 0.69%
Premium / Discount: -10.2%
Size: £ 1.12 billion
One year: 26%
Five years: 100.3%
One year: 9.6%
Five years: 75.7%
Data source: AIC, 6/29/2020
JP Morgan’s confidence in Japan has risen 19.3 percent since early 2020, compared to a gain of 4.75 percent for average confidence in the AIC sector.
It has an ongoing charge of 0.69 percent and shares are currently trading at a 10 percent discount on its net asset value.
Rival trusts include Baillie Gifford’s highly rated pair of Baillie Gifford Japan and Shin Nippon, which invests in smaller companies along with growth from Fidelity Japan and Schroder Japan.
Nicholas says that while people often think of Japan as a very high-tech country – and in some places like Tokyo it is – much of the rest of the nation is catching up with the rest of the world
He says, “In many ways Japan is lagging behind the rest of the world and that is the main opportunity. In Japan, e-commerce is only about 8 percent of total sales. It is still very low and that is an opportunity. ‘
He also mentions the low level of card payments in Japan, with 80 per Nicholas Weindling cent of transactions still being made in cash – something he says is going to change.
Nicholas argues that for investors this means that in terms of growth, the country’s companies must outperform other major markets, such as the US, where many of the world’s digital gains have already been achieved.
It was feared that Japan and its older population would suffer severely from the coronavirus pandemic, but deaths were low and it prevented strict closure