The strong rebound of the Japanese economy following the earthquake of 2011 failed to materialise and serves as a warning against chasing themes in the Land of the Rising Sun.
That is according to Chern-Yeh Kwok, who is head of Japanese equities at Aberdeen Asset Management and oversees two funds on behalf of the firm.
Speaking to Citywire Global, the ardent stock-picker warned there were simply too many events to follow in Japan in order to capitalise on changing themes – from the earthquake to nuclear radiation to flooding to the recent election of Shinzo Abe.
'In Japan there has been a massive amount of change and news over the past two years; from the earthquake to the disruption of supply and then we had radiation issues and then the flooding in Thailand.’
‘Also, if you look at what happened after the earthquake, a lot of discussion in the press was that perhaps the construction companies would perform well or rather the infrastructure redevelopment would help boost the economy but that hasn’t really happened.’
Following the election of Abe, Kwok had warned the Japanese economy was in such a dire situation that the new Prime Minister was unlikely to foster a significant turnaround.
This was regardless of efforts such as the 10.3 trillion yen (€87 billion) stimulus package announced earlier this month. These measures have received criticism from a number of other quarters as well.
‘Whenever there is a government stimulus it can provide a temporary boost but we don’t focus on these themes,’ he said.
'We rather just look at the companies and how they may or may not benefit from these events and try to figure out whether these companies have sustainable business models.’
Additions and removals
The most recent additions to the €300 million Aberdeen Global – Japanese Equity fund were to add baby products manufacturer Pigeon and bicycle components manufacturer Shimano.
Both were added as minor positions based on the fundamentals of the stocks.
Meanwhile, Kwok said he had exited a position in Japanese department store chain Parco, which had been subject to a takeover bid from rivals J.Front which failed to reach completion.
The Aberdeen Global – Japanese Equity fund has returned 19.2% over the same period. Kwok replaced Flavia Cheong as lead manager on this fund in January 2011.
This compares to the Topix TR, its Citywire benchmark, which rose 1.28% over the same period.
Chern-Yeh Kwok is set to feature in the Managers to Watch section of the February 2013 edition of Citywire Global magazine.