Despite improving earnings, increasing levels of corporate activity and buoyant markets, small-cap companies in Japan have been largely ignored by stock market investors. For the quarter ending 31st Dec 2020, the MSCI Japan Small Cap Index, in GBP, returned 2.2% while its larger counterpart, MSCI Japan, returned 9.0%. Foreign capital flows into Japan were positive in November and December – a rare occurrence over the past five years. For the time being much of that capital appears to be going into large cap names, although in time, we expect this to broaden out to include smaller companies too. AJOT’s return of 1.0% over the quarter is disappointing considering the very strong earnings recovery reported by portfolio companies, as well as the encouraging backdrop of a recovery in global economic activity.
AVI Japan Opportunity Trust p.l.c is referred to as ‘AJOT’ throughout the website. AJOT’s investment managers, Asset Value Investors are referred to as ‘AVI’