Opportunities emerging from dispute

Market Development: The Japanese markets gained in August amid a lack of any fresh news. The Chinese government’s rules for the education sector and other restrictions imposed on the gaming and real estate industries dampened global investor sentiment.

MONATLICHER FONDSKOMMENTAR
10 Sep 2021

Market Development: The Japanese markets gained in August amid a lack of any fresh news. The Chinese government’s rules for the education sector and other restrictions imposed on the gaming and real estate industries dampened global investor sentiment.

The US market dipped and rebounded due to the chaotic behaviour of the Chinese government, which triggered global investors to withdraw money from the region. The Japanese markets were relatively quiet, and we have been able to seek business opportunities while the dispute between the US and China continues. We have profit taken and reduced exposure to overvalued stocks, such as Oriental Shiraishi, TIS, Comture, Future, Rorze, and Asics over the month.

Market Outlook

Japanese PM Suga, aged 72, has decided not to seek re-election as leader of the ruling party, therefore he will not be the next Prime Minister of Japan. Kishida, aged 64, the former Minister of Foreign affairs in Abe’s cabinet, is running for President of the Liberal Democratic Party (LDP), several other candidates may also stand for election.

The LDP could maintain their current seats in the House of Representatives and, through a coalition with the Komei Party, maintain their majority in the House following the general election, which will be held in October 2021 as scheduled.

The next coalition government should maintain the current government policies, but may also introduce relief aid for people, similar to what we saw last year when COVID-19 began to spread in Japan. We will watch corporate earnings carefully, as they will be fragile due to increased input prices and uncertainty over product demands during the latter half of this fiscal year. We will continue our research and maintain the current portfolio.

Portfolio Development

TIS, Comture and Future are Digital Transformation (DX) related companies that have performed well for several months. Earnings of such DX companies may continue to rise, but the current valuations of these companies have increased so much that we decided to reduce the risk by lowering the Fund’s exposure to them.

As always, we invite investors, or prospective investors in the Strategic Japan Opportunities Fund to discuss the opportunities with the investment team if they would like to understand our views on the current situation and the positions held in the portfolio. Please do not hesitate to contact Adam or visit the Fund Page >

Adam TurbervilleAdam Turberville
Director
+44 1481 742380
a.turberville@ericsturdza.com

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The views and statements contained herein are those of Rheos Capital Works Inc in their capacity as Investment Adviser to the Fund as of 10/08/2021 and are based on internal research and modelling. Please click on Disclaimer Page to view full disclaimers.