It was a quiet summer for the market with the index trading within a 5% range and closing unchanged, and the Yen/Stg exchange rate doing broadly the same. September has been more active with market up about 5% and the currency weakening. Style factors had less of an influence on the market compared to recent history.
The main domestic drivers over the quarter were Q1 results announced in August, short term economic distortions caused by a succession of natural disasters, a return to relative domestic political calm and speculation ahead of the BoJ's end July meeting. Corporate results for the first quarter were moderately supportive and financials rallied briefly ahead of the BoJ meeting on the view that the central bank may take a more sympathetic view in relation to the sector, suffering from adverse side effects of prolonged monetary easing.
Global macro factors were never really off the agenda and by and large caused international investors to adopt a cautious (net sell) stance. Trade and emerging market volatility were the main culprits. In relation to the former, Japan has stayed largely out of the fray but the ratcheting up of trade tension between the US and China, Japan's 2 largest export markets, has been a source of concern.
Commodity prices continued to rise and this was apparent in the sector winners and losers. The oil sector was the top performer and the airline sector the worst. More defensive sectors such as telecoms and pharmaceutical also performed well although individual stock drivers also played a role here ( Softbank in the former’s case and Eisai in the latter's). Other under performers were a mixture, real estate, construction, food and the tyre sector
Over the 12 months to end August the market rose 9% in yen and slightly less in sterling, reflecting marginal yen weakness relative to the pound. Most of the positive return came in the initial 4 months of the period under review. The best performing sector was again the oil sector, reflecting consolidation within the refining sector as well as the higher oil price. Cyclical sectors such as steel and shipping were amongst the largest under performers. Tyres also underperformed, impacted by Bridgestone's weakness. The service sector, pharmaceuticals and trading companies were some of the other best performing sectors over the year.
|Q3/2017 - Q3/2018||Q3/2016 - Q3/2017||Q3/2015 - Q3/2016||Q3/2014 - Q3/2015||Q3/2013 - Q3/2014|
|Net Asset Value||11.3||17.0||28.0||6.8||6.4|
|Tokyo Stock Exchange 1st Section Index (TOPIX) (TR)||13.0||12.6||32.2||6.3||1.3|
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