Fund Profile

Disclaimer

This is a non-independent marketing communication commissioned by abrdn. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
AJIT’s focus on quality Japanese companies could be a source of strong returns as the world’s economy goes through a period of de-globalisation…
Overview

abrdn Japan Investment Trust (LON:AJIT) has a rigorous approach to investing in high-quality growth companies across the market capitalisation spectrum, aiming to deliver sustainable long-term returns. The Japanese stock market has c. 3,800 listed companies and, particularly at the lower-size range, there are many under-researched companies which provide active managers with the opportunities to add alpha. AJIT’s management team, led by Chern-Yeh Kwok, is predominantly based in Tokyo, which makes company meetings and primary research more practical. At the same time, the team is plugged into abrdn’s wider Asia Pacific and Global equities’ teams, giving them insight into how global businesses in the portfolio are performing in different markets and against different competitors.

In the last few years, global stock markets, including those of Japan, have seen a focus on higher-growth companies where ‘quality’ hasn’t always been the most important factor. AJITs focus on quality means that while it has outperformed its benchmark, it has trailed some of its peers with a greater focus on growth (see Performance). Recent market turmoil, in the wake of rising interest rates and inflation, has seen the premia afforded to the highest-growth companies contract as investors reassess their growth potential. Although we are still in the midst of this phase of the market, a return to a more discriminating stock market that places value on quality should be constructive for a quality-investor like AJIT. Every portfolio company is evaluated against strict quality criteria and is subject to peer review amongst the team.

Three years ago, AJIT introduced an enhanced Dividend policy and since then has maintained a dividend of 15p per share, equivalent to a yield of 2.6%, as at the time of writing. This, together with AJIT’s current discount of 14.7%, may make it an interesting option for Japanese equity exposure at a time when Japan could perform well in a changing global environment.

Analyst's View

The issue of deglobalisation is on the minds of many fund managers, concerned by the inflationary effects of a global economy that, for practical and political reasons, is retreating from the globalised supply chains that came to dominate the opening decades of the twenty first century. Japan is an interesting case study against this backdrop. Japan’s demographics, with an ageing population, low immigration rate and a tight employment market, has meant that it has for many years been a world leader in automation and robotics, much of which originated in its car industry. In addition, many of Japan’s largest manufacturers are very international, in terms of manufacturing close to their end markets. In our view, this means that Japan has some key skills and attributes that should be very positive in a global economy that will need to find ways to reduce labour costs as it reconfigures manufacturing and services to be either ‘on-shored’ or ‘near-shored’.

Quality growth has been slightly left behind in recent years, as the market has placed more value on high growth. In our view, a higher interest rate and inflationary environment should be supportive for higher-quality companies and AJIT should perform well in this environment.

On top of this, AJIT’s discount, currently 14.7%, is attractive relative to peers and is likely to narrow as the financial year-end approaches, for reasons discussed in the Discount section. AJIT’s enhanced dividend, using a mixture of current earnings and revenue and capital reserves, means that AJIT has a relatively attractive yield of 2.5%, a premium to the average for the AIC Japan peer group.

Bull

  • Quality growth could outperform in a higher inflation environment
  • Deglobalisation could be constructive for Japanese companies
  • Relatively high dividend

Bear

  • Discount could fluctuate according to proximity to discount control mechanism
  • Dividend partly funded from revenue and capital reserves
  • Japanese equities typically very sensitive to global economic growth
Continue to Portfolio

Fund History

21 Dec 2022 Fund Analysis
AJIT’s focus on quality Japanese companies could be a source of strong returns as the world’s economy goes through a period of de-globalisation…
09 Dec 2022 Bull in China shop considers other options
Which economies could benefit from global trends to reshoring and de-globalisation…
12 Oct 2022 The Buck stops where?
The US dollar has surged in 2022, but many are questioning whether this can be sustained...
06 Jun 2022 Fund Analysis
AJIT offers investors access to some of Japan’s highest-quality companies at a wide discount…
13 Oct 2021 Fund Analysis
AJIT trades on a wide discount despite recent strong performance…
18 Feb 2021 Fund Analysis
AJIT invests in high-quality Japanese equities, while paying a high dividend…
02 Dec 2020 Can you teach an old dog new tricks?
Cheap companies in Japan are drowning in what cheap companies elsewhere would kill for: buckets of cash…
19 Aug 2020 Fund Analysis
AJIT will continue to pay a considerably increased dividend yield relative to history...
27 Feb 2020 Robbing Peter to pay Paul?
Two of our analysts discuss the growing trend for companies to pay an income out of capital…
13 Feb 2020 Fund Analysis
AJIT’s dividend will be significantly higher going forward…
28 Nov 2019 Is there a generational opportunity in Japan?
Two of our analysts go head-to-head, arguing the case for Japan...
10 Jul 2019 Fund Analysis
The trust will offer a more substantial income this year than in the past...
22 May 2019 On a roll
As Western economies show signs of their own 'Japanification', we explore the Japanese industries poised to take advantage of this change...
04 Dec 2018 Fund Analysis
Aberdeen Japan aims to generate long-term capital growth from a concentrated portfolio of Japanese stocks...
View all

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.