12th February 2016
Japan continues to face serious economic hurdles that will continue for the first half of the year but Fidelity’s Nicholas Price believes it is a short-term correction.
Japanese markets lurched sharply lower today as trading resumed after yesterday’s National Foundation Day holiday. The TOPIX fell 5.4% in yen terms marking its steepest weekly decline since 2008.
With markets already concerned about the threat of a global recession, financial turmoil and uncertainty in credit markets further exacerbated the fears.
A flight to safety increased demand for the yen, which briefly hit Y110/$, and the currency was poised for its most significant fortnightly advance against the dollar since the Asian financial crisis of 1998.
Price, manager of the Fidelity Japanese Values investment trust, said that authorities in Japan had expressed concerns over the ‘rough’ moves which fuelled speculation they would intervene.
Despite the problems faced at the moment, Price is ultimately confident for the prospects for Japan.
‘Many Japanese companies will face higher hurdle rates in the first half of 2016 and the weaker outlook for Asia in general combined with a stronger yen means that it is critical to find reasonably valued companies that can deliver solid growth next year – fiscal year 2016,’ he said.
‘We are now in the midst of the full year 2015 Q3 reporting season, and it is a good opportunity for me to visit many companies and check up on how their respective businesses are performing. This enables me to find gaps between negative near-term sentiment and mid-term fundamentals.’
Price added that the correction in marks made the price of investments more attractive.
‘Overall, the type of short-term correction that we are experiencing provides the opportunity to increase holdings in companies at more attractive prices, where I have a high level of conviction in their mid-term growth prospects,’ he sad.
‘Although there has not been any significant change in my portfolios, I have been adding stable domestic growth companies in areas such as telecommunications, services and retailing. Conversely, I have been selectively reducing holdings in technology-related companies that are experiencing a deceleration in business momentum and are losing earnings support from the yen.’