Market Development: During November, the Japanese market rose sharply on the back of Joe Biden’s victory in the US Presidential election. Investors who were anxious about the future of the largest financial economy in the world began to re-invest in the market.
The news of successful COVID-19 vaccines significantly changed global investor sentiment, lifting markets during the month. Japanese Industrial Production for October rose 3.8% month-on-month which was the fifth consecutive rise, whilst Shipping rose 4.6% and Inventory declined 1.6% month-on-month in the same period. The October Inventory level declined to around the March 2014 level, demonstrating the remarkable progress of inventory adjustment under the COVID-19 environment.
Domestically, the COVID-19 situation is getting worse, probably caused by the “GoTo Travel” and “GoTo Eat” campaigns which were initiated by PM Suga to encourage people to spend by going out to eat more often and increasing travel around Japan. The number of domestic travellers increased significantly as a result of the campaign, as did the number of infected COVID-19 patients.
The situation at hospitals is deteriorating and they are on the brink of entering into a state of emergency. As Japan enters the winter months and temperatures drop, restaurants are ceasing to ventilate with outside air, increasing the likelihood of exposing customers to COVID-19, which could result in a rise of cases towards the end of the year.
While there is no evidence of a high correlation between the increased number of travellers and restaurant-goers and the increase in the number of COVID-19 patients, the fact remains that the COVID-19 situation in Japan is getting worse. That said, the market continues to rise as if there is no fear of infection at all. Investors believe that the government will continue to support markets and citizens as much as they can.
The same thing has been seen globally with governments and administrations willing to support people, and as such, people who have some cash are investing in the market with a sense of security. We will maintain the current portfolio.
Rorze (6323) is engaged in the design, manufacture and sale of automation systems for the semiconductor and flat-panel display production. The company manufactures printed circuit board conveyors and wafer handlers for semiconductor manufacturing. Other products include sorters, vacuum chamber robots and controllers and stepping motor drivers used in automation systems. Semiconductor manufacturing slowed due to over-storage and the weak sales of electronics under the COVID-19 environment.
Rorze (6323) began its recovery in late 2020, and we expect a further increase in production toward 2021. Their magnet division produces and sells magnets for precision shaft motors, which will be key components in other company products. All Rorze products are needed in various semiconductor and FPD manufacturing sites, and demand should continue to expand globally. P/E 17x, PBR 3.6x, ROE 23.1%.
If you have any questions about the Fund or would like further detail on our views, please do not hesitate to contact us. Visit the Fund Page >
Head of Marketing & Client Relations
+44 1481 742380
The views and statements contained herein are those of Rheos Capital Works Inc in their capacity as Investment Adviser to the Fund as of 04/12/2020 and are based on internal research and modelling. Please click on Disclaimer Page to view full disclaimers.