Page 11 - DIY Investor Magazine - Issue 27

‘A LOCAL PRESENCE WITH A GLOBAL PLATFORM DRIVES THE BEST RESULTS’
How do we find that value? To our mind, it is important to
be local. Japanese corporate culture has its idiosyncrasies
and being able to talk to companies in Japanese, while understanding the etiquette and dynamics is vitally important in making a judgement on a business.
That said, many Japanese companies are global in their outlook, part of global supply chains and competing with international peers. As such, a local presence with a global platform drives the best results.
Among our recent engagements was Kansai Paint, a long term holding, but one where the management team had started to neglect customer engagement. We pushed the business to restructure and to focus more on profitability.
This has been reflected in an improving share price. These engagements are vitally important in helping ensure that the value in a company is realised in the share price.
THE FUTURE
We believe Japan should prove a good place to invest for the coming economic recovery. Sectors such as technology, autos and those linked to China growth are already seeing improving demand.
Japanese corporates are busy, exports have rebounded and we see growing earnings across a range of cyclical sectors. At the same time, the new Prime Minister, Yoshihide Suga, has promised a continuation of Japan’s economic reforms and is driving areas such as digitisation.
Japan is an exciting market for active investors. Investors can take exposure to many important global themes at a fraction of the price they would pay in the US market. It is time for investors to cast aside some of their historic views on the Japanese market and discover the value to be found there.
Equally, it is important to engage with companies to improve governance and release value. Governance has long been a sticking point for Japanese companies. Japanese companies have historically been prone to excessive caution.
They have sat on huge cash balances, resisted value-adding merger and acquisition activity, and lack dynamism. There have been moves in recent years to improve governance and there are signs that companies are achieving a better balance. We actively engage with companies to try and improve their governance record.
11 DIY Investor Magazine | Mar 2021