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Underweight in Japan helps boost performance at Witan Pacific

Underweight in Japan helps boost performance at Witan Pacific

Witan Pacific performed strongly during the first six months of the year, recording nearly twice the gain of its benchmark index.

The £158 million investment trust, run by underlying managers Nomura and Aberdeen Asset Management, saw its net asset value (NAV) per share climb 5% above the MSCI AC Asia Pacific Index to achieve an NAV total return of 10.8%.

Both Aberdeen and Nomura outperformed throughout the half-year to the end of July, with Aberdeen’s performance particularly robust as its low Japanese weighting helped deliver a 13.8% total return, some 8% ahead of the index.

The performance of Indonesian conglomerate Astra International played into this as well, as the recovery in car sales, financial services and contract mining offered a boost to the company's its first-half figures.

Nomura’s small underweighting to the Japanese market was another positive, and while recognising the structural problems that exist in the country, Nomura’s managers are said to be encouraged by the state of Japan's underlying economy.

Double dip not on the horizon

‘During market weakness the domestic oriented sectors such as infrastructure were relatively unchanged and [the managers] point out many stocks appear cheap  with very attractive dividend yields,’ Gillian Nott, the trust's chair,  said in an update to shareholders as she dismissed fears of a renewed recession in the US and highlighted strong growth signs in key Asian markets.

Nomura argues that Asia Pacific nations have enjoyed a decent recovery from the global financial crisis, with most delivering strong GDP growth rates in the first half of 2010, with India, Korea, Taiwan and Singapore leading the charge, the chair pointed out.

Nomura has a full weighting within each region and in addition, its managershave bulked up exposure to China – a region tipped to lead the next leg of the market recovery.

Moreover, Nomura think a double dip recession is unlikely to occur and in contrast expect an increase in capital spending led by the US private sector to benefit emerging Asian economies.

‘Asian Pacific stockmarkets are now set to rise further after the recent perood of consolidation,’ Nott said.

Shares in Witan Pacific, which is trading on a 16.6% discount to NAV, are currently priced 191.8p, around 11p higher than the 179.5p recorded at 31 July.

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