Fidelity Japanese Values shares double NAV gains in H1

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Fidelity Japanese Values has seen its share price double the returns of its NAV in H1 as investor interest in the country increases; however, the fund manager lists geopolitics, particularly surrounding North Korea, could threaten sentiment.

The £165.1m investment trust NAV returned 10.9 per cent outperforming the Russell Nomura Mid/Small Cap Index, which delivered 6.7 per cent.

However, the share price more than doubled the returns of the NAV delivering 22.2 per cent over the first six months.

Domestic-oriented sectors, such as retail and foods, drove the investment trust’s outperformance, says fund manager Nicholas Price.

“In the retail sector, Tokyo Base, a relatively under-researched fashion apparel business, was the standout contributor to performance over the period. The speciality retailer has successfully differentiated itself in a tough market by focusing on products sourced from Japanese designers and made-in-Japan private brand goods.

“Ryohin Keikaku, the operator of the Muji brand of general merchandise stores, also reported solid full-year results.”

Price has increased holdings to fast growing services companies and globally competitive technology related names.

While he says the Bank of Japan remains highly accommodative and domestic consumption is gradually improving along with employment, Price says external geopolitical factors could pose a threat.

“Particularly concerns over North Korea, combined with heightened political uncertainty in Japan may also weigh on risk sentiment.”

Price adds a slowdown in the global economic cycle may tilt risks to the downside, with policy changes by major central banks likely to be a key variable.

“However, on balance, we believe that the prospects for Japanese equities remain positive, and are heartened by the steadily increasing interest on the part of foreign investors,” Price says.