Japan equity veteran Ruth Nash has hit out at commentators who ‘bash’ the market over concerns that it has lost its entrepreneurial edge.
‘The Japan-bashers like to claim that there is no entrepreneurial spirit in Japan, or that it is only a handful of the Mothers-listed names which have any drive or ambition. I disagree,’ she said.
‘Indeed, many of the company presidents I met during the week had originally founded their companies to introduce new services or products to the Japanese market and were continuing to innovate.’
Nash highlighted an unnamed company CEO who is looking to further increase AI in their business field. She said there were also examples which investors may consider more leftfield but innovative nonetheless.
‘Some of the money-making schemes did sound slightly bizarre, but there is no lack of ambition. One company had bought an old theme park for a song from a major real estate developer,’ she said.
‘The president explained that, because there are currently more pets than children in Japan, he had decided to turn it into a pet-friendly park. There will be special doggy-friendly areas and doting pet owners will be even be able to take their pets with them on rides, for a fee of course.’
Autos on the up
Looking at allocations, Nash said there was a growing important for the autos sector – both for the sector specifically and also for its work in collaboration with companies drawn from across other businesses.
‘As cars become increasingly sophisticated, they are consuming more and more by way of electronic materials and components. For some of the materials companies, this is a welcome opportunity,’ she said.
‘Taiyo Holdings, one of the companies we own, makes resist ink used on circuit boards. Until recently, its business has been very reliant on demand from smart phone-makers. This is a great business when demand is strong, but orders can disappear almost overnight.
‘However, the president explained that Taiyo is now selling a lot of its high end dry resist to the automakers. Automakers plan new models three or more years ahead, so this is giving Taiyo much better visibility about future order growth.’
Taiyo sits outside the top 10 positions in the JOHCM Japan fund at present. The largest single stock allocation is a 3.7% investment in financials firm Tokio Marine, while financials and insurance is the largest sector bet. It accounts for 23.4% of the fund.
The JOHCM Japan fund returned 20.7% in Japanese yen terms over the three years to the end of February 2017. This compares to a 34% rise by the Topix over the same timeframe.