investing in Japan

moneylover

I have never invested in funds or investment trusts in Japan but according to Money Observer its the fastest growing area.
Does anyone have a fund in Japan that has been a steady Eddie? Also, I read today that many investors have taken profits ahead of the two day meeting of the Bank of Japan as new financial measures may be announced - is this likely to be a form of QE and if so would that not help shares/funds?
There was also an article in FT today that indicated that most of the profit may now be built in...Also there was an article last night, it may have been citywire or morningstar about currency hedging and unfortunately I cannot find that again - one kind of fund that made the better returns was a bit riskier but I believe that a fund called GLG Japan alpha was mentioned as a possibility - did anyone see that article?

JoeCrystal

Really? Japan is the fastest growing area? By what measure I wonder, did Money Observer say which one?

A mighty Wikipedia suggested that the fastest growing country in 2011 by the real GDP growth rate is Mongolia with 17.50%.

I always like Mongolia. Mostly empty country.

srcandas

I think they may be referring to the main index growing almost 25% in 2 months.

And it looks like the government are pushing ahead with agressive policies despite resistance from the BoJ.

Moneylover I'm just wondering if after such a steep rise you have missed the boat?

:beer:

Jegersmart

moneylover wrote: »

I have never invested in funds or investment trusts in Japan but according to Money Observer its the fastest growing area.
Does anyone have a fund in Japan that has been a steady Eddie? Also, I read today that many investors have taken profits ahead of the two day meeting of the Bank of Japan as new financial measures may be announced - is this likely to be a form of QE and if so would that not help shares/funds?
There was also an article in FT today that indicated that most of the profit may now be built in...Also there was an article last night, it may have been citywire or morningstar about currency hedging and unfortunately I cannot find that again - one kind of fund that made the better returns was a bit riskier but I believe that a fund called GLG Japan alpha was mentioned as a possibility - did anyone see that article?

Legg Mason Japan and the Invesco Perp Japan for about the last 6 months and both of these are up handsomely. The Nikkei Index is up around 25% form the low last year and I was lucky enough to get most of that. The main reason I like Japan is that for th emedium term I see the Yen going bear which *should* support Japanese equities, and of course the recent QE has helped matters. I am not sure personally how long term an investmen tin Japan would be for me, certainly the Nikkei has been at 16k some time ago and we are barely at 11k now - but I will probably keep holding for most of this year unless something drastically changes. The GLG fund is a good one, I just happened to choose the other two as they had been bashed more then the other pure Japan funds when I looked to enter. Anyone of these should be a good quality fund to get involved in if you like Japan as an area to invest. Personally I think Japan has huge problems, but I could see the equities likely to rise which of course has nothing to do with the state of the economy per se......

I think I would prefer to add to China and SE Asia at this point on any pullback rather than add to Japan personally. It does depend on your other holdings etc of course.

imho
J

Glastoun

Two months on and equities in Japan are still rising - almost all of the top performing funds over the last 1 week, 1 month and 3 months are Japan related.

Any ideas if this could end very soon? The yen is still as weak against the dollar (or strong, can never remember which) and there's a new Prime Minister who is about to embark on QE so could the strength in equities continue over the mid-term? Or is some of the rise attributable to the amount of money being put into Japan funds recently?

Would be kicking myself if I hung onto this for too long.

redbuzzard

I am 13% up in about 6 weeks with the Japan index. Dangerous, I might start to think I'm clever.

I'll hang on for now. We all expect the yen to depreciate but as long as it is out-depreciated by sterling that remains a positive factor for those who live in UK. As with the American and European index holdings I am keeping a close eye on the direction of exchange rates. I'm most nervous about the European index holding - but exposure to the Eurozone one way or another is pretty hard to avoid ;-)

Totton

HLTV recently discussed Japan in their 'Growth' video http://www.hl.co.uk/news/tv

takesyourchances

I have been interested in Japan as well and as part of my new portfolio opened the Aberdeen Japanese small company fund, I feel the lower priced companies have potential in Japan in the long term and hopefully the new measures from the government in Japan help with this.

I have only had this fund open a few weeks and it has been interesting, I opened with £500 and will be dripping £50 in next month and every couple of months as I switch drips between funds.

Thanks.

Glastoun

redbuzzard wrote: »

I am 13% up in about 6 weeks with the Japan index. Dangerous, I might start to think I'm clever.

I'll hang on for now. We all expect the yen to depreciate but as long as it is out-depreciated by sterling that remains a positive factor for those who live in UK. As with the American and European index holdings I am keeping a close eye on the direction of exchange rates. I'm most nervous about the European index holding - but exposure to the Eurozone one way or another is pretty hard to avoid ;-)

Interesting - which exchange rates are you keeping an eye on, and in which direction would be bad movements for you? Not just Japan but globally.

As far as I know (very little) my investment funds are priced in pounds but invested in companies outside the UK - so if the yen value of the Japan fund shares remained the same, but the yen/pound exchange rate changed, that would change my fund value?

moneylover

redbuzzard wrote: »

I am 13% up in about 6 weeks with the Japan index. Dangerous, I might start to think I'm clever.

Redbuzzard, is this money in an ETF?

The GLG Japan Apha fund that I have is hedged, I don't know whether that is important at the moment with the direction of the currencies or not? Can anyone elighten me whether it is a consideration or not if I should invest in another Japan fund?

redbuzzard

Glastoun wrote: »

Interesting - which exchange rates are you keeping an eye on, and in which direction would be bad movements for you? Not just Japan but globally.

As far as I know (very little) my investment funds are priced in pounds but invested in companies outside the UK - so if the yen value of the Japan fund shares remained the same, but the yen/pound exchange rate changed, that would change my fund value?

I do not consider myself an expert investor (that's a health warning).

Partly for that reason I favour passive investments so although I have some "defensive" managed equity funds like Henderson Cautious Managed and Invesco Perpetual Income (still classified as Medium-High risk, but I take comfort from the yield and quality of the holdings and I am after some growth) I do incline to index funds too which have an edge on costs. I am a medium and long term investor.

Start with UK equities. Many of the companies you will be holding have very international businesses anyway. If sterling depreciates against the relevant currencies, then that does not of itself affect your companies' overseas profits in local currency, though it might be good for them if they are exporting goods or services from the UK.

What is does mean is that those overseas profits are worth more when translated into sterling. So, broadly speaking, your UK equities should benefit in £ terms from falling sterling. The net benefit to you of course needs to be set against higher inflation (linked to the falling pound) so while you might not be net better off, it helps to preserve the real value of your investment.

Holding overseas equities. Say you hold a Japan index fund like HSBC's, as I do in the accumulation units where income is reinvested and adds to the unit price.

If exchange rates are steady, it's very straightforward and your return is that of the Japanese market, or at any rate the 90% of it that's in the FTSE Japan index.

If the yen depreciates (more yen to the pound) then your return will be lower. If the yen strengthens against the pound, it will be higher.

In February after several months of sliding against the pound, the yen strengthened which is what made me look cleverer than I am. That might be reversing, it's hard to say. Japan is expected to do more QE. If the yen goes on a slide again it may wipe out the positive effect any improvement in the Nikkei has on the unit price.

That is how currency risks works, other things being equal. Of course things never are equal, because the depreciation of the yen will help Japanese companies that export to perform better...but, short term, the value of your investments in Japanese companies will fall, possibly dramatically.

It is possible to buy some funds in a currency-hedged version - e.g. the GLG Japan CoreAlpha fund. There you would receive something approximating to the same return in GBP as the fund makes in JPY.

However, one reason for me to hold some overseas equities is as an inflation hedge. If the pound is driven down in world terms, I don't want to be hedged - I want the GBP (more £) appreciation in the value of the investment.

To get back towards the question - although I am happy for now to have the Japan index, because there is a good chance it will continue to do OK IMO, I am keeping an eye on exchange rates - without really having any confidence as to which direction it will go in as Japan and UK try to out inflate each other!

I have slightly more confidence in the dollar, hence holding American index too with more of an eye to the currency upside.

None of this sits especially easily with my relative lack of sophistication and "passive" inclination to allocate, buy the markets and go fishing. But these are strange times, and I need to try and counter the inflation that seems very likely - George hasn't many other options IMO, and priority number one is not to have negative real returns.

Sorry about the stream of consciousness reply - I haven't really time to edit down and check just now. Very much E&OE.