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Why Japan, why now?

January 2021

Hisashi Arakawa, Investment Manager, Aberdeen Japan Investment Trust

Rich opportunities

  • At Aberdeen Japan Investment Trust, we see fertile ground for investors with strong research capabilities to unlock hidden value in Japanese equities.
  • Japan is home to one of the world’s largest stock markets, yet 42% of Tokyo Stock Price Index, or Topix stocks are not covered by analysts, versus 6% on the Russell 3000 Index.
  • Several Japanese stocks have multiplied their share prices five or 10 times over the past 10 years.

 Good companies, strong fundamentals

  • Japan is home to many high-quality firms with strong balance sheets, sustainable cash flows and defendable competitive advantages.
  • The presence of companies with strong fundamentals creates opportunity for higher average returns on equity and dividend pay-out ratios than the market, as well as materially lower debt to equity ratios.
  • Price discrepancies among high-quality companies may enable investors to extract long-term value.

 

Why Aberdeen Japan Investment Trust?

  • Our experienced Japanese equities team is part of one of the deepest pools of investment talents with the greatest breadth of coverage in the Asia Pacific region. The team is on the ground, prioritizes first-hand research, knows management teams well and focuses on quality stocks. 
  • We engage company-management teams on environment, social and governance (ESG) issues to seek to manage risks, boost returns and ensure their strategies are sustainable. We emphasize ESG during our company due-diligence process, to seek to minimize exposure to governance failures.
  • We focus on the best businesses in the Japanese equity market. We prioritize quality, including strong balance sheets, sustainable competitive advantages and good margins and return on capital. We believe that quality companies produce less volatile, more resilient, sustainable earnings streams.

 

 Why now?

Encouraging economic recovery

  • Even amid the economic fallout of the global coronavirus pandemic, Japanese companies remain in a healthy position. Almost half of non-financial companies listed on MSCI Japan Index have net cash on their balance sheets, with the best-run firms well-placed to sustain profitability regardless of the macroeconomic environment. Companies with net cash can invest in their future growth and/or return money to shareholders.
  • Conscientious adherence to rules governing personal protection and social distancing has helped Japan to contain Covid-19 infections relatively well. Partly as a consequence, recovery data is encouraging. The Bank of Japan, for example, has raised its economic outlook for most regions of the country.
  • Japanese businesses are better placed for economic recovery than counterparts in many major economies worldwide.
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Important information
Risk factors you should consider prior to investing:

  • The value of investments and the income from them can fall and investors may get back less than the amount invested.
  • Past performance is not a guide to future results.
  • Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
  • The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
  • The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
  • The Company may charge expenses to capital which may erode the capital value of the investment.
  • Derivatives may be used, subject to restrictions set out for the Company, in order to manage risk and generate income. The market in derivatives can be volatile and there is a higher than average risk of loss.
  • Movements in exchange rates will impact on both the level of income received and the capital value of your investment.
  • There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
  • As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
  • Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

Other important information: Issued by Aberdeen Asset Managers Limited which is authorised and regulated by the Financial Conduct Authority in the United Kingdom. Registered Office: 10 Queen’s Terrace, Aberdeen AB10 1XL. Registered in Scotland No. 108419. An investment trust should be considered only as part of a balanced portfolio. Under no circumstances should this information be considered as an offer or solicitation to deal in investments.

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Risk Warning
Risk warning
The value of investments and the income from them can go down as well as up and you may get back less than the amount invested. Please refer to the relevant Key Information Document (KID) prior to making an investment decision. Please be aware of scams that can affect investors.