The Jupiter Far Eastern fund has cut back on its exposure to Japan, even though the group is positi...
The Jupiter Far Eastern fund has cut back on its exposure to
Japan, even though the group is positive on good value opportunities available within the market.
Fund manager Lynne Ross, speaking at the group's London roadshow last week, said in the past couple of weeks the Japan weighting has been moved to 50% from a 55.26% position as at the end of June. Weightings in Hong Kong have been increased over the past few weeks, moving from 16.32% position at the end of June to more than 23% currently.
The fund's position in Japan is high but is still well underweight the benchmark weighting of 66%, Ross said.
She added: "Japan can either look cheap or expensive depending on what information you look at. Japan is considered expensive on a P/E of 45 times. It can also look cheap when you consider half of the index is on a price to book of under one. There are plenty of oversold, cheap companies in Asia as a whole but particularly in Japan."
The switch in market sentiment earlier in the year to new economy stocks has created a lot of buying opportunities elsewhere in the region. At the end of February Jupiter Far Eastern was invested 60% in new economy stocks and 35% in old economy and cash. By the beginning of March, new economy stocks were priced to perfection, Ross said, while old economy businesses were on 25 year absolute lows.
She said: "Some businesses, especially in Japan had cash on their balance sheets worth more than their market cap. Buying the unfashionable can reap rewards and that is why flexibility matters here." The fund moved to a 65% weighting in old economy versus 32% in new economy, and Ross anticipates that the portfolio will remain this way for the short term.
In the Far East including Japan sector, Jupiter Far Eastern is ranked first out of 21 funds over three years to 19 July on an offer to bid basis, returning 95.1%, well above the sector average of 12.4%. Over one year to 19 July, the fund has returned 26.8% and is ranked second out of 21 funds. Over three months, on a bid to bid basis, the fund is ranked fourth with returns of 9.8% compared to the sector average of 6.4%.
When looking at the region, Ross said it was important to keep in mind the diversity of the various countries, as most are economically at different stages of development.
She said: "On a country basis we look at a number of things, including economic growth, monetary policy, market indicators, market valuations and flow of funds. We also look at things such as the share volumes on the various stock markets as movements in these markets have a greater impact on the man in the street than in more developed countries. For example the Hong Kong government owns 15% of its stock market and 50% of the companies are owned by the founding families. Liquidity in these markets is tight even when the market looks huge."
Ross said the high concentration of family owned shares in companies will negatively impact the market as the MSCI indices move to include free floats, which could cause the Asian region to be downgraded. On the upside, she said there remains good growth opportunities in the region, most notable in Japan and China.
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