Japan is a sector that has been out of favour with investors for a long time. However many managers believe that the market now represents excellent value. Indeed many Japanese companies trade at, or close to, their 'book value', or the net value of their assets. By comparison other Asian markets trade at around twice book value and UK companies’ average 1.7 times. Whilst this situation has remained for some time many managers are asserting the view that Japan’s time will come in the not too distant future. Paul Chesson, manager of Invesco Perpetual Japan certainly thinks so and he has increased the amount of his fund that he holds in his personal portfolio to 30% in the last year.
Paul Chesson’s approach to investing begins by taking account of the wider economic environment. Of course Japan’s economy has its share of problems, notably an aging population and a high level of public debt. For some time Paul Chesson was relatively downbeat on Japan and quite candid about the opportunities - or lack of them! However, he now believes that exciting prospects have developed in specific areas of the market. In particular he has focussed his fund on the large, globally orientated firms, whose share prices he thinks will benefit from a strong recovery in profits. Indeed, many Japanese companies are global leaders in their respective industries, particularly in electronics and technology, and could be key beneficiaries of a global recovery.
Paul Chesson believes the Japanese market is priced for an overly pessimistic scenario and that there is ample room for upside in the event of any positive news. Japan’s position in the heart of Asia may help provide it. Emerging markets like China and India are becoming wealthier and are making up a larger proportion of global consumption. They are increasingly hungry for the high tech and luxury goods Japanese companies produce. In fact, Asia now accounts for more than 50% of Japanese exports with the US representing less than 20%.
As with any overseas market, investors face the risk of currency movements, and the Yen has been particularly strong for a number of years. Whilst it could weaken, thereby diluting returns for UK investors, such a scenario would be of huge benefit to Japanese exporters as their goods would become more competitive globally, potentially leading to increases in their share prices.
If you want to build some exposure to Japan I think this fund represents an excellent choice. Paul Chesson has 20 years experience running Japanese funds and has generated excellent returns versus his peer group, although past performance is no guide to the future. If Japan does enjoy a return to form we believe this fund stands to fully capitalise and we are pleased to add it to our Wealth 150 list of preferred funds in each sector.
Key Features of the Invesco Perpetual Japan Fund
Paul Chesson’s approach to investing begins by taking account of the wider economic environment. Of course Japan’s economy has its share of problems, notably an aging population and a high level of public debt. For some time Paul Chesson was relatively downbeat on Japan and quite candid about the opportunities - or lack of them! However, he now believes that exciting prospects have developed in specific areas of the market. In particular he has focussed his fund on the large, globally orientated firms, whose share prices he thinks will benefit from a strong recovery in profits. Indeed, many Japanese companies are global leaders in their respective industries, particularly in electronics and technology, and could be key beneficiaries of a global recovery.
Paul Chesson believes the Japanese market is priced for an overly pessimistic scenario and that there is ample room for upside in the event of any positive news. Japan’s position in the heart of Asia may help provide it. Emerging markets like China and India are becoming wealthier and are making up a larger proportion of global consumption. They are increasingly hungry for the high tech and luxury goods Japanese companies produce. In fact, Asia now accounts for more than 50% of Japanese exports with the US representing less than 20%.
As with any overseas market, investors face the risk of currency movements, and the Yen has been particularly strong for a number of years. Whilst it could weaken, thereby diluting returns for UK investors, such a scenario would be of huge benefit to Japanese exporters as their goods would become more competitive globally, potentially leading to increases in their share prices.
If you want to build some exposure to Japan I think this fund represents an excellent choice. Paul Chesson has 20 years experience running Japanese funds and has generated excellent returns versus his peer group, although past performance is no guide to the future. If Japan does enjoy a return to form we believe this fund stands to fully capitalise and we are pleased to add it to our Wealth 150 list of preferred funds in each sector.
Key Features of the Invesco Perpetual Japan Fund
