By Eve Maddock-Jones, Reporter, Trustnet, 10 December 2021
Trustnet continues its study into which trusts have the most inflated valuations and biggest discounts relative to their five-year average, this time focusing on Japanese investment trusts.
Japan has been one of the most marmite markets over the past two years, topping the charts in 2020 only to fall back this year.
The Nikkei 225 index of Japan’s largest companies made an impressive 17.5% return last year, beating the wider global MSCI World index and the US’s S&P 500 index. But this year it has fallen 1.4% at a time when the US market has made 30.7% and global stocks are up 24.5%.
After such a dismal year, investors may believe they can pick up some cheap bargains, but reviewing the IT Japan and IT Japanese Smaller Companies sectors, there are few that are on bigger discounts than usual. However, there are also few that are extremely expensive either.
In this series, Trustnet looks at which investment trusts had diverged at least 5 percentage points off their five-year average premium/discount. Where a trust did not have a five-year track record, the data was from its launch date.
A share price premium or discount can be a big point of focus for investors. When people sell out of a trust in large waves this can cause the share price to drop, even if the underlying holdings keep their value, creating a share price discount. If this is coupled with those underlying stocks falling, those remaining in the trust can end up with two sets of losses.
This also works the other way: if more people buy the trust’s shares, they could be more expensive than the total value of the underlying holdings, placing the investment company on a premium.
Having looked at the UK and Global sectors, where there were several trusts that deviated from their long-term average, when Trustnet looked at the North America sector there were relatively few cheap or expensive trusts.
Japanese trusts are in the latter camp with their North American peers. Data provided by QuotedData revealed just two trusts met the criteria: CC Japan Income & Growth and Nippon Active Value.
Read more here