Complete your registration today for a chance to win £50 John Lewis vouchers in our weekly draw Enter now
David Kimberley
View profile
Updated 12 Jan 2024
Save Article Download

Disclaimer

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.

Readers who waste as much time as I do on YouTube may have also experienced the sensation of having an unwanted video thrust upon you by the website’s algorithm, only for you to end up rather enjoying it and then watching the whole thing. This happened to me earlier this week and the programme in question was a short documentary from 1982 about Japan.

Filmed at the start of a booming decade for Japan and already over 30 years into the country’s post-war ‘economic miracle’, it is remarkable to watch the unbridled optimism with which the Land of the Rising Sun is presented by an Australian narrator.

“The most interesting exhibit is Japan’s greatest natural resource: the Japanese people,” says the narrator, as the camera pans across a future technology exhibition. “Energetic, highly trained – they more than any other nation anticipate and accept technological change. They believe it will look after them. They face the future without fear.”

Surely nothing will stand in their way?

One industry which the documentary highlighted as set to offer a new export boom for the country was robotics. This has actually panned out. Roughly half of all global industrial robot exports come from Japan today, something we see in the portfolios of Japan-focused trusts like Schroder Japan (SJG) and JPMorgan Japan Small Cap Growth & Income Trust (JSGI).

One of the arguments made for Japan’s success in robotics is essentially that ‘necessity is the mother of invention’. With a shrinking and increasingly elderly population, Japan needs robots to undertake labour that humans used to. The documentary takes another angle. Japan, the narrator tells us, produces 2.5x as many science and technology graduates as Germany and the UK combined. Japan’s greatest natural resource is the force behind its success.

Interestingly, this is an argument we see made a lot today by China bulls. In 2020, China had 3.6m graduates in science, technology, engineering, and mathematics (STEM) subjects. This was the highest in the world by far and far in excess of what the US, France, Germany, and the UK combined produced. The country also had the highest proportion of its overall student body (41%) enrolled in STEM subjects.

It is hard to make the case that this is a bad thing. As Fidelity China Special Situations (FCSS) Manager Dale Nicholls noted in the presentation he gave to Kepler Trust Intelligence readers at the end of last year, many technology companies in China are now world leaders. For instance, FCSS holding an autonomous vehicle company pony.ai is on par with or perhaps even superior to its peers elsewhere in the world.

On the other hand, there may be something to be said for the system in which you operate as a STEM graduate that determines just how economically impactful you end up being. To take another example, Russia produces a huge number of STEM graduates and has the second-highest proportion of its student body studying STEM subjects globally.

And it is noteworthy that Google, WhatsApp, and PayPal all have founders that were born in the Soviet Union. The founder of UK-based XTX Markets, very possibly the most profitable company in the world today on a per employee basis, was as well. So too were the two founders of Revolut, which may be the UK’s most valuable fintech. Russia has also produced several world-leading tech companies, like Yandex and VK, which don’t really have any competitors outside of the US and China. Google even tried to acquire Yandex at one point and its arguable that its indexing technology is actually superior to the Silicon Valley firm’s.

However, the two founders of Yandex, one of whom has passed away, both left Russia. The original founder of VK had the company effectively stolen from him by the government. He has since left the country and founded Telegram, which is now the third-most used messaging application after WhatsApp and China’s WeChat.

The point here is that Russia may have a great education system for STEM subjects but most of its successful students make their money outside of the country. Those that did stay and built companies have also ultimately followed a similar path.

China is not Russia and crackdowns on the tech sector by the former appear to have been reigned in. Nonetheless, there are still warranted fears that, even if China does produce a lot of clever university graduates, they won’t be given the space needed to thrive in the future.

In contrast, it will be interesting to watch India – the country that produces the second-largest number of STEM graduates in the world. Even if some may find flaws in the country (as you would with any), India is a democracy and it is hard to see the sort of corporate land grabs or seemingly arbitrary crackdowns on companies there that we see in other parts of the world.

Mobius Investment Trust (MMIT) manager Carlos Hardenburg noted at one of our events last year that he has never seen so much enthusiasm for the country’s prospects in the 30 years he has been investing there. Perhaps we can expect a YouTube documentary about how employees at Indian startups face the future without fear in the next couple of years.

Press continue to read the full article...

Kepler Trust Intelligence provides research and information for professional and private investors. In order to ensure that we provide you with the right kind of content, and to ensure that the content we provide is compliant, you need to tell us what type of investor you are.

Continue

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.