By James Thorneley INVESCO Tokyo's discount is almost twice that of GT Japan even though both are ru...
By James Thorneley
INVESCO Tokyo's discount is almost twice that of GT Japan even though both are run in similar style by the same manager.
Merrill Lynch is recommending a switching opportunity for shareholders in GT Japan to sell and buy shares in INVESCO Tokyo.
As at close of business last Tuesday GT Japan was trading at a discount to NAV of 12.5% while INVESCO Japan's discount was 22.5%.
The two portfolios are run using a bottom-up approach with a bias towards 'new Japan' tech, media and telecom stocks. The holdings are virtually identical with the major difference being GT Japan's ability to hedge.
Akira Hiramine is manager of INVESCO Tokyo and took over running GT Japan in February this year when previous manager Andrew Callendar returned to the UK.
Both portfolios are relatively concentrated, each with around 50 holdings, although Hiramine is planning to increase this by five in the coming months. One reason is because of the increasing amount of IPOs coming to the market. The other is that Hiramine is bullish on broking houses.
The only Japanese investment trust which has a hedge in place at present is Perpetual Japanese. While the GT and INVESCO trusts are very similar the respective boards are reluctant for them to be merged into one.
Around ¥106 trillion will be released from post office saving schemes in April and Hiramine expects ¥49 trillion to be invested in Japanese investment trusts, equivalent to UK unit trusts.
He added: "Household investment in equities is nowhere near that of the US and over the coming years I expect an increasing of money to be invested in investment trusts which can only beneficial for brokerages."
Although bullish on brokerages Hiramine is negative on the banking sector as borrowing falls. Large cap companies are now cash rich after selling off cross-share holdings and medium to small cap companies raise funds through issuing shares in the market, he said.
On the market as a whole Hiramine is bullish although recent figures contradict his positive outlook.
In the second half of last year GDP growth was negative and February 2000 household consumption fell by 3.2%. Hiramine expects a strong recovery in production during the first half of the year fuelled by demand for machinery. Two months ago machinery orders rose by 5.6% after a 23 months slump. A recovery in consumption will be slower and take place in the last quarter of 2000.
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