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Japan Dynamic Fund
Investing in volatile equity markets

Seize its dynamic opportunities

Investing in volatile equity markets

Japan is typically seen as a low growth economy with a rapidly ageing population, both of which keep the lid on domestic consumer spending. Yet Japan has always been a corporate, not an economic, revival story. Investors willing to look beyond economic data will discover a market that is attractively valued compared to global equities and offers opportunities on a bottom-up basis.

Japanese corporates are in a good shape owing to the gradual and steady restructuring over the last decade. The corporate reform story has resulted in improved trend profitability and higher operational efficiency. As a result, corporate earnings have remained resilient despite the pandemic.

Reasons to invest in Japan

Corporate reforms are driving profits

Profitability has generally improved on a trend basis; even during the height of the pandemic in 2020, the operating profit margins only fell to the peak level of the previous cycle. This was achieved by Japanese companies managing their capacity and cost base well.

A graph showing rising corporate profitability for Japanese companies

More Japanese companies are cash rich

Long-term restructuring efforts have included deleveraging of balance sheets, which has led to high levels of cash and offered many companies a level of flexibility in funding their ongoing operations.

More Japanese companies are cash rich

Japan is cheap compared to global peers

Despite resilient earnings and improved companies’ fundamentals, the market did not re-rate and is still valued much lower than other major markets. Lower starting valuations are supportive of likely future outperformance for the market.

A graph showing the value of Japan equities compared to global equities

in rising opportunities

At Eastspring Investments, our focus remains on identifying the many mispriced Japanese companies with good quality income streams that are yet to be recognised by the market. We expect corporate reforms and structural changes have another five to ten years to play out. Investors who are keen to reap long-terms gains from this market may consider a strategic allocation to Japan equities in their portfolios for these reasons.

Eastspring Investments – Japan Dynamic Fund

A high conviction and unconstrained strategy A portfolio that is unconstrained by market cap or market’s thematic preferences, containing 30-50 of our best idea stocks that are undervalued according to their fundamentals.

Differentiated valuation approach Our value differentiator lies in our detailed analysis that looks for the longer drivers of a company’s sustainable earnings using a consistent valuation framework.

Choice of share classes The Fund is also available in SGD and USD hedged share classes. The hedged share classes offer investors returns that are correlated to the base currency (JPY) of the Fund.

Proven track record Highly experienced team with a track record of over 16 years of navigating Japan’s equity universe and delivering strong performance.

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Eastspring Investments – Japan Smaller Companies Fund

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Investment approach

Our differentiated investment approach enables us to see things differently. This approach systematically identifies “high impact valuation outliers” and is durable over time and market cycles.

invetment approach

Idea generation: Systematically look for mispriced assets. Focus on extremes. Identify maximum impact opportunities

Fundamental analysis Confirmation that value exists. Deepen understanding and test conviction

Portfolio construction: i) Establish & monitor the risk/reward relationship. ii) Link research output to portfolio construction and review

Risk control and review: Ongoing feedback supports sell-discipline. Ensure integrity of investment process

Eastspring's low volatility investment approach

Idea generation

Systematically look for mispriced assets. Focus on extremes. Identify maximum impact opportunities.

Eastspring's low volatility investment approach

Fundamental analysis

Confirmation that value exists. Deepen understanding and test conviction.

Eastspring's low volatility investment approach

Portfolio construction

Establish & monitor the risk/reward relationship. Link research output to portfolio construction and review.

Eastspring's low volatility investment approach

Risk control and review

Ongoing feedback supports sell-discipline. Ensure integrity of investment process.

Idea generation

Eastspring's low volatility investment approach

Systematically look for mispriced assets. Focus on extremes. Identify maximum impact opportunities.

Eastspring's low volatility investment approach

Fundamental analysis

Confirmation that value exists. Deepen understanding and test conviction.

Portfolio construction

Eastspring's low volatility investment approach

Establish & monitor the risk/reward relationship.
Link research output to portfolio construction and review.

Eastspring's low volatility investment approach

Risk control and review

Ongoing feedback supports sell-discipline. Ensure integrity of investment process.

Interview with Eastspring's Quantitative Team

Find out how our Quantitative Strategies team leverages technology and data to identify and exploit market inefficiencies caused by market volatility and behavioural biases.

Lead fund manager

Ivailo Dikov

Head of Japan Equities

Related insights

Keep abreast of developments with insights from our investment experts.

Japan’s good value creates alpha opportunities
Potential to benefit from a Yen rebound
Value investing in Asia: Japan is well positioned for ...
Uncover the value opportunities in Japan

Source

1 Asia Bond Monitor Summer Issue released in 2010 and 2020 by the Asian Development Bank. Data as of March.
2 J.P. Morgan, as of March 2020. Asian USD bond market size is represented by the market value of J.P. Morgan Asia Credit Index.
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DISCLAIMER

This document is issued by Eastspring Investments (Singapore) Limited (UEN: 199407631H). Eastspring Investments (Singapore) Limited is the appointed Singapore Representative and agent for service of process in Singapore. This advertisement has not been reviewed by the Monetary Authority of Singapore.

The Fund is a sub-fund of Eastspring Investments, an open-ended investment company with variable capital (Société d’Investissement à Capital Variable or SICAV) registered in the Grand Duchy of Luxembourg, which qualifies as an Undertakings for Collective Investment in Transferable Securities (“UCITS”) under relevant EU legislation. The Management Company of the SICAV is Eastspring Investments (Luxembourg) S.A., Grand-Duchy of Luxembourg.

All transactions into the Fund should be based on the Singapore Prospectus and Product Highlights Sheet (“PHS”). Such documents, together with the articles of incorporation of the SICAV and the most recent financial reports, may be obtained free of charge from Eastspring Investments (Luxembourg) S.A., or at relevant Eastspring Investments business units/website and their distribution partners.

This document is solely for information and does not have any regard to the specific investment objectives, financial or tax situation and the particular needs of any specific person who may receive this document. This document is not intended as an offer, a solicitation of offer or a recommendation, to deal in shares of securities or any financial instruments.

Please refer to the offering documents for details on fees and charges, dealing and redemption, product features, risk factors and seek professional advice before making any investment decision. An investment in the Fund is subject to investment risks, including the possible loss of the principal amount invested. The value of shares in the Fund and the income accruing to the shares, if any, may fall or rise. Where an investment is denominated in a currency other than the base currency of the Fund, exchange rates may have an adverse effect on the value, price or income of that investment. Investors should not make any investment decision solely based on this document. Investors may wish to seek advice from a financial adviser before purchasing shares of the Fund. In the event that an investor may choose not to seek advice from a financial adviser, the latter should consider carefully whether the Fund in question is suitable for him.

Past performance and the predictions, projections, or forecasts on the economy, securities markets or the economic trends of the markets are not necessarily indicative of the future or likely performance of Eastspring Investments or any of the funds managed by Eastspring Investments. There are limitations to the use of indices as proxies for the past performance in the respective asset classes/sector.

The Fund may use derivative instruments for efficient portfolio management and/or hedging purposes.

Eastspring Singapore is an ultimately wholly-owned subsidiary of Prudential plc of the United Kingdom. Eastspring Singapore and Prudential plc are not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America or with the Prudential Assurance Company, a subsidiary of M&G plc, a company incorporated in the United Kingdom.

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Prudential plc, incorporated and registered in England and Wales. Registered office: 1 Angel Court, London EC2R 7AG. Registered number 1397169. Prudential plc is a holding company, some of whose subsidiaries are authorized and regulated, as applicable, by the Hong Kong Insurance Authority and other regulatory authorities.

Prudential plc is not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America or with the Prudential Assurance Company Limited, a subsidiary of M&G plc. A company incorporated in the United Kingdom.

Copyright © 2021 Eastspring Investments (Singapore) Limited. All rights reserved.

Wei Ming Cheong

Portfolio Manager

Wei Ming Cheong joined Eastspring Investments, the Asian asset management business of Prudential plc, in November 2005. Wei Ming is a Portfolio Manager of the Fixed Income team and is responsible for managing and overseeing local currency fixed income strategies, including regional Asia, Singapore, Indonesia and RMB local currency fixed income funds. Wei Ming holds a Master degree in Finance from RMIT, Australia, and a Bachelor of Accountancy from Nanyang Technological University, Singapore.

Danny Tan

Portfolio Manager

Danny Tan joined Eastspring Investments, the Asian asset management business of Prudential plc, in February 2004. Danny is a Portfolio Manager of the Fixed Income team and is responsible for managing and overseeing portfolios of our insurance clients, as well as credit-focused portfolios. Danny is a CFA charterholder and holds a Bachelor of Business degree in Financial Analysis (Hons) from Nanyang Technological University, Singapore.

Ivailo Dikov

Head of Japan Equities

Ivailo Dikov is the Head of our Japan Equity focus team, and the Lead Portfolio Manager for the team’s Japan Focused Value strategies. He has over 17 years of investment experience, holds a Master of Business from the Tsukuba University in Japan and is fluent in Japanese.

Samuel Hoang

Portfolio Manager

Samuel Hoang is a Portfolio Manager in our Japan Equity focus team. Prior to joining the Japan Equity team, Samuel was a member of the Regional Asia focus team, and the Lead Portfolio Manager for our Vietnam Equity strategy. Samuel has over 17 years of investment experience, holds an MBA from Waseda University in Japan, and a Bachelor of Economics (Hons) from Foreign Trade University in Vietnam.

Rong Ren Goh

Portfolio Manager

Rong Ren Goh joined Eastspring Investments in January 2016 as a Portfolio Manager in the Fixed Income team and is responsible for the management of Global, Japan and selective Asian local currency fixed Income funds. Rong Ren has 12 years of investment experience and holds a Bachelor of Science (Hons) Economics from London School of Economics.

Fig 1: Corporate profitability is on the rise

A graph showing rising corporate profitability for Japanese companies
Source: Profit Margin % of sales from Refinitiv Datastream MOF. For illustration purposes only. The indices described are unmanaged and not available for direct investment. Latest data available as 30 November 2022. Current Profits of all Japanese Incorporated Enterprises Industries (Except Finance and Insurance) / Sales, in Japanese Yen.

Fig 2: Japan’s non-financial companies have high levels of net cash

More Japanese companies are cash rich
Source: “Cash rich” companies based on Japan (Topix), US and Europe (MSCI indices) from Nomura, as at 13 December 2022. Companies ratio is the number of positive net cash companies divided by the number of index composite companies.

Fig 3 : Japan equities are attractively valued compared to global equities

A graph showing the value of Japan equities compared to global equities
Source: Eastspring Investments, IBES MSCI Indices, Refinitiv Datastream, as at 30 November 2022. Past performance is not an indication of the future or likely performance. For illustration purposes only. The indices described are unmanaged and not available for direct investment. Indices used: MSCI Japan Index, MSCI Europe Index, MSCI AC Asia Pacific ex-Japan, MSCI EM Latin America Index, MSCI AC World Index, MSCI USA Index Projections, forecasts, opinions on the economy, securities markets or the economic trends of the markets are based upon Information and sources believed to be reliable at time of publication and subject to change without notice.