Invesco’s Chesson backs manufacturing in Japan

Invesco Perpetual’s Paul Chesson is backing manufacturers to benefit from the next leg of market rises in Japan.

The group’s head of Japanese equities said he had added to manufacturers in his £310.2m Japan fund in the past few months because the area had lagged other sectors in the initial market gains earlier this year.

The manager now has 62.1 per cent of his fund in manufacturers and said he was overweight the two sub-sectors within that, the car and bike industries, as well as the electronics sector.

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“If you take the past year, we have taken significant profits out of our reflation beneficiaries, such as stockbrokers and real estate holdings, as they were the leading sectors in the initial part of the market move,” he said.

“We have added to manufacturing, which lagged the move, particularly technology.”

Mr Chesson said the fund’s benchmark Topix index has rallied strongly from the end of last year until May this year, but that since then it had remained volatile and below the peak achieved in the second quarter.

The manager thought roughly 40 per cent of the portfolio had underperfomed the market since the middle of 2012, but said he still believed the portfolio had a “lot of upside”, adding much portfolio activity had been reducing and increasing holdings rather than buying new ones.

“We have not had to add new names because the manufacturing sector is the best and cheapest thing we can find and will capture the further upside that we see,” he said.