Japanese semiconductors draw investor focus

Market Development: The Japanese market declined in the middle of June, but recovered again by the end of the month, led by small caps. The market was concerned by inflation risk in the US, but this soon eased when the FRB officially stated that the Fed will not be raising rates until 2023.

Monthly Fund Commentary
16 Jul 2021

Market Development: The Japanese market declined in the middle of June, but recovered again by the end of the month, led by small caps. The market was concerned by inflation risk in the US, but this soon eased when the FRB officially stated that the Fed will not be raising rates until 2023.

The US and China dispute continued and accelerated in relation to the semiconductor sector and its manufacturing issues; particularly those related to global foundry companies such as TSMC of Taiwan and SMIC of the People’s Republic of China. Even though tensions rose between both governments, global investors did not react and adopted a wait and see approach.

Market Outlook

The Japanese Government has decided to proceed with the Olympic and Paralympic Games in Japan from 23rd July. The Tokyo Metropolitan government will maintain the soft close-down of towns in Tokyo, but the number of Covid-19 patients has increased in recent days.

Vaccinations have progressed throughout the Japanese population, but it has now slowed down due to vaccine supply shortages. Domestic consumption may hover around the current level for a while, but we expect it to recover toward the end of this year. As we have stated, we believe consumption trends will change and despite the economy recovering overall, it will not return to as it was before.

We are monitoring the US and China dispute which has influenced global supply-chains. In this context, Japanese electronics manufacturers have a chance to gain market share in certain products due to changes in both the consumption trend and the global supply chain system. We are looking for potential beneficial parties that can fit into the remote working environment and the new lifestyle of people in Japan.

Portfolio Development

Tamura Corporation (6768) – During the month, Tamura Corporation, manufacturers of electric components for industrial and consumer use, performed well. This was mainly due to news that the company has developed a new generation of semiconductors, made of gallium oxide, that makes it possible to create an environment of extremely low power consumption.

The share price of Tamura rose 49% in June and contributed to the portfolio’s return for the month. Semiconductor manufacturers remain the focus of investors.

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

_

The views and statements contained herein are those of Rheos Capital Works Inc in their capacity as Investment Adviser to the Fund as of 12/07/2021 and are based on internal research and modelling. Please click on Disclaimer Page to view full disclaimers.