Baillie Gifford Shin Nippon’s net asset value per share rose by 29.5% over the six months ended 31 July 2016 compared to a 23.0% rise in the MSCI Japan Small Cap Index. The share price increased by 31.6%.
They say there was a noticeable investor rotation towards undervalued real estate related names. Beneficiaries of this were stocks such as the specialist condominium builder Takara Leben. Japan is in need of a significant overhaul of its ageing infrastructure, more so in light of the 2020 Tokyo Olympics, and this is where a significant portion of the government’s new fiscal stimulus is likely to be spent. Infrastructure related names such as Sho-Bond, which specialises in reinforcing concrete structures such as bridges, highways and tunnels, were particularly strong on the back of this announcement.
Amongst the other strongest performers in the portfolio were several of the long term internet related holdings. Their focus on rapidly expanding domestic niche markets allowed these businesses to open up new revenue opportunities. Start Today, which operates the leading online apparel marketplace, MonotaRO, which operates a website that sells millions of maintenance and repair related items required by small businesses on a daily basis, and M3, which provides online marketing support for pharmaceutical companies, all continued to grow rapidly. Many of these internet businesses are reaching the point where they become sufficiently dominant in their niche that it is possible to start increasing the charges that they levy on their customers. If successful, this should increase the profitability of these businesses.
BGS : Baillie Gifford Shin Nippon outperforms again