The six-month period to 31 January 2016 saw weaker performance from the Japanese stock market. Schroder Japan Growth’s net asset value per share on a total return basis reduced by 4.6% (compared to a negative total return of 1.9% for the period from the Benchmark Index). The share price produced a negative total return of 8.7% as the discount widened from 6.4% to 10.5%.
The Company’s NAV underperformance of the benchmark return was primarily due to the gearing. This was maintained in the range of 10-15% through the period, leading to losses when the market declined. Unusually for the portfolio, the impact of the sector and sector positions were both self-cancelling. Underexposure to defensive sectors such as food detracted, offsetting positives in retail and telecoms stock selection. Two smaller cap holdings, Koito Manufacturing and Sakata Inx contributed positively, whilst the main detractors were financials such as T&D Holdings (an insurance company) and banks SMFG and 77 Bank.
SJG : Schroder Japan Growth hit by gearing