Fidelity Japan Trust (FJV) closed out a tough year, announcing results for the period ending December 2022. The company NAV fell by 24.3%, well behind the TOPIX benchmark which was down just 4.1%. Shares fell in sympathy, down 28.1%. Despite the share price volatility, the discount has remained relatively stable at around 10% over the 12 months thanks to the board’s active discount management policy.
Commenting on the underwhelming performance, chairman David Graham noted;
“2022 was one of the most challenging years for financial markets in a long time and this was reflected in the returns of Fidelity Japan Trust PLC. While the TOPIX, the Japanese market index, fell by only 4.1% in sterling terms over the year to 31 December 2022, the market saw a savage rotation out of growth stocks, where the company has remained heavily weighted, and into value stocks where the company was under represented. This resulted in the company’s NAV per share falling by 24.3% over the year to 31 December 2022 and the share price of the company falling by 28.1%. Last year’s performance has also impacted the cumulative performance over three and five years but the ten year performance of the company remains strong with both the share price and NAV significantly outperforming the Reference Index.”
Touching on the outlook, he continued;
“Since the end of 2022, the gloomy prospects for the world economy have receded a little and markets have recovered from their low levels. As at 28 February 2023, the NAV of Fidelity Japan Trust has risen by 4.3% which compares to a rise of 1.4% in the Reference Index.
Overall, the valuation of companies in Japan are looking attractive both in historic terms as well as relative to other markets and the profitability of Japanese companies continues to improve. As a result, the board remains positive about the prospects for the company for 2023 and over the medium-term unless there is a significant deterioration in sentiment on account of global geopolitical issues or a sustained financial crisis triggered by the collapse of Silicon Valley Bank and subsequent contagion in the global banking sector. We are confident that Nicholas Price and the Fidelity investment team in Tokyo, with their disciplined, research-driven investment process, will return to delivering strong investment returns for shareholders.”
FJV : Fidelity Japan Trust caught by growth value rotation