LONDON (Reuters) - Britain’s Jupiter is adding to electronics exporters in its Japan Income Fund, believing the Bank of Japan will have to intervene further in the currency and the money markets to weaken the yen and stimulate the economy.
"Exporters were already looking attractive because of the valuations but in the last month we have accelerated our shift to exporters because we felt the Bank of Japan had to intervene," said Simon Somerville, manager of the 203 million pound fund JUP.L.
In September Japan sold the yen against the dollar for the first time since 2004 in an attempt to drive down its value and help exporters. “The yen was so strong it was beginning to stifle the whole economy,” Somerville said.
This month the Bank of Japan said it would adopt a zero interest rate policy until deflation is corrected, and unveiled plans for a 5 trillion yen (38 billion pounds) asset purchase fund.
Somerville believes these steps are not sufficient and Japan will have to increase the scale of its intervention, both in the currency and the money markets. “We have positioned ourselves for more action,” he said.
He is overweighting companies exporting to the rest of Asia, citing Fanuc 6954.T, which makes robots and control units for machine tools, as an example of a recent addition.
“Chinese manufacturers have to automate because wages are going up too much,” he said, adding that Fanuc already had about 60 percent of the Chinese market.
Some 23 percent of the fund is now in electronics, a 6 percent overweight versus its Topix benchmark.
Somerville has recently added to Murata 6981.OS, a world leader in ceramic capacitors used in mobile phones, TVs and computers. Murata should benefit from a weaker yen as Korea's Samsung 005930.KS is one of its main rivals.
The fund has a 3 percent overweight to financials expected to benefit from the Bank of Japan’s liquidity injection.
The biggest position is Sumitomo Trust & Banking 8403.T, now around 4.5 percent of the fund. As the largest agent for real estate transactions in Japan it should benefit if property deals pick up.
"The mainstream real estate stocks are not that cheap but we are monitoring the situation as we recognise they might do well in this environment," said Somerville, adding that he does hold housebuilder Sekisui Chemical 4204.T.
He also holds Aeon Mall 8905.T, a shopping mall operator, as a play on the increasing numbers of wealthy Chinese tourists. "They have Mandarin speakers in several of their shopping centres to help them," he said.
The Jupiter Japan Income Fund was up 3.7 percent in the 12 months to end-September, beating its Lipper Global Japan equity peers by 3 percentage points.
Editing by Michael Shields
Our Standards: The Thomson Reuters Trust Principles.