Stock calls boost Baillie Gifford Japan Trust

Strong stock selection including adding Sony and disposing of long-term holdings with “less promising” future prospects, have helped boost the performance of the Baillie Gifford Japan Trust.

In its half-yearly annual report the board reported the trust’s net asset value (NAV) per share had increased by 3.8 per cent in the period compared with a 2 per cent fall in the Topix index, while the company’s share price had increased by 7.6 per cent.

Sarah Whitley, manager of the £271.4m investment company, noted that the net gearing level of 14 per cent, combined with the stock selection had helped performance.

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Turnover in the portfolio was relatively low with just seven holdings sold and three new ones bought.

Ms Whitley stated: “The significant growth in total assets of over 40 per cent in the past year, owing to a combination of rising stock markets, portfolio outperformance and share issuance, means that some smaller holdings have become insignificant and several of these have been sold along with long term holdings such as Japan Tobacco and Canon where we believe future prospects are less promising.

“We also added to a range of existing holdings to maintain our level of exposure. We bought new holdings in CyberAgent, an online conglomerate involved in blogs and advertising, Toyo Suisan, a leading noodle manufacturer, and Sony, where we believe that tough action is being taken on the loss making parts of the business and also that the company is the winner in the latest generation of game consoles.”

Looking ahead the manager noted that in spite of the positive background overseas investor confidence in progress in Japan has faltered, “perhaps because of concerns about the impact of the increase in consumption tax that takes place in April”.

But she added: “The tax increase is universally expected to lead to economic weakness in the April to June quarter, but this has long been anticipated and is well discounted. Investor impatience and a desire to have a binary view, good or bad, have led to a sell-off by overseas investors recently. However we continue to believe that longer term developments are positive and valuations are now lower and therefore more attractive. Patience may be required but should be rewarded.”