Japan Dynamic Fund | Eastspring Investments

Japan has always been a corporate, not an economic, revival story. The market’s recent rally indicates investors’ growing recognition of the positive changes from ongoing corporate reforms. The good news is that profit margins continue to improve and the long-term upward trajectory for earnings remains intact.

Yet the market still trades at very attractive valuations versus global peers which suggests more upside potential for patient investors. Furthermore, over the longer term, Japanese companies are at the gateway of Asia (ex-China), where they can both facilitate and partake in Asia’s growth story.

Reasons to invest in Japan

Corporate reforms are driving profits

Profitability has generally improved on a trend basis; even during the height of the pandemic in 2020, the operating profit margins only fell to the peak level of the previous cycle. This was achieved by Japanese companies managing their capacity and cost base well.

Japan is cheap compared to global peers

Despite resilient earnings and improved companies’ fundamentals, the market did not re-rate and is still valued much lower than other major markets. Lower starting valuations are supportive of likely future outperformance for the market.

More Japanese companies are cash rich

Long-term restructuring efforts have included deleveraging of balance sheets, which has led to high levels of cash and offered many companies a level of flexibility in funding their ongoing operations.

in rising opportunities in Japan

At Eastspring Investments, our focus remains on identifying the many mispriced Japanese companies with good quality income streams that are yet to be recognised by the market. We expect corporate reforms and structural changes have another five to ten years to play out. Investors who are keen to reap long-terms gains from this market may consider a strategic allocation to Japan equities in their portfolios for these reasons.

Eastspring Investments – Japan Dynamic Fund

A high conviction and unconstrained strategy A portfolio that is unconstrained by market cap or market’s thematic preferences, containing 30-50 of our best idea stocks that are undervalued according to their fundamentals.

Differentiated valuation approach Our value differentiator lies in our detailed analysis that looks for the longer drivers of a company’s sustainable earnings using a consistent valuation framework.

Choice of share classes The Fund is also available in SGD and USD hedged share classes. The hedged share classes offer investors returns that are correlated to the base currency (JPY) of the Fund.

Proven track record Highly experienced team with a track record of over 16 years of navigating Japan’s equity universe and delivering strong performance.

Investment approach

Our differentiated investment approach enables us to see things differently. This approach systematically identifies “high impact valuation outliers” and is durable over time and market cycles.