LONDON (Alliance News) - JPMorgan Japan Smaller Companies Trust PLC on Monday said the total return on its net assets, net of fees and expenses, was negative 4.5% in the six months to September 30, compared with negative 5.7% for its benchmark, the S&P/Citigroup Japan Extended Market Index (Total Return Net) in sterling terms.
The total return for ordinary shareholders was negative 7.9%, reflecting a widening of the discount at which the shares were trading to the cum-income net asset value at the period end.
"Japanese equity markets started the period by extending their earlier gains but, by June, international investors became increasingly nervous as the Greek debt crisis escalated. When China unexpectedly devalued its currency in August, the TOPIX index, which is the bellwether for the Japanese equity market, fell by over 10%, eliminating virtually all the gains that it had made for the year to date and causing the portfolio to suffer losses," Chairman Alan Clifton said in a statement.
"Whilst the portfolio's performance in the first half year was better than its benchmark, the board is disappointed by the overall negative returns," Clifton said.
"The difficulties experienced by economies in Europe and in emerging countries, including China, suggest that the risks to the global economy are skewed to the downside. The uncertainties have led to a disappointing economic performance in Japan. We nevertheless remain optimistic about the Japanese equity market because of the favourable earnings outlook and undemanding valuations. Positive momentum can be expected from the continuing corporate governance reforms, the recently agreed Trans-Pacific Partnership, and the Bank of Japan's commitment to its 2% inflation target. The government of Prime Minister Shinzo Abe is also expected to re-focus on its economic agenda in the lead up to the July 2016 upper house elections," Clifton said.
On this basis, the manager intends to maintain its bias towards growth stocks with strong balance sheets and cash flows rather than towards cyclical companies. The board is confident that this strategy will benefit the portfolio and, consequently, shareholder returns," Clifton added.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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