Performance evaluation of FJPNX
The Fidelity Japan Fund (FJPNX) fell 3.7% in the first four months of 2016. That placed it as a below-average performer among the nine funds in this review. In the past one year, the fund has fallen 7.3%, which also points to a below-average performance. From the end of December 2015 until May 10, 2016, the fund has fallen 1.5%. Below, we’ve graphed its performance against two ETFs: the iShares MSCI Japan ETF (EWJ) and the iShares Currency Hedged MSCI Japan ETF (HEWJ).
Let’s look at what has contributed to the fund’s below-average performance in the first trimester of 2016.
Portfolio composition and contribution to returns
The financials sector was the biggest negative contributors to FJPNX’s total returns in the first four months of 2016. Mitsubishi UFJ Financial Group (MTU) was by far the biggest negative contributor from the sector. Sumitomo Mitsui Financial Group (SMFG) and Tokio Marine Holdings (TKOMY) were also notable negative contributors. Although Orix (IX) and a few others contributed positively, their total quantum was quite low. They were unable to make a big dent in the negative contributions from others.
Consumer discretionary followed financials in terms of negative contributions to returns. Honda Motor (HMC) led negative contributors, which included Toyota Motor (TM) and Mazda Motor (MZDAF), among several others. There was some positive contribution from stocks such as Bridgestone (BRDCY) and Sony (SNE), which marginally reduced the overall negative contribution. Meanwhile, information technology was led down by Hitachi (HTHIY).
Telecom services did the most in terms of reducing the fund’s overall negative returns. All three stock picks from the sector, namely KDDI, SoftBank Group (SFTBY), and Nippon Telegraph & Telephone (NTT), contributed positively. Meanwhile, Japan Tobacco (JAPAY) helped consumer staples contribute positively in the period.
The financials sector has had a hard time in 2016 so far. It was thus no surprise that the sector emerged as the biggest negative contributor. However, its quantum of negative contribution was much lower than those comprising EWJ. What actually hurt FJPNX were stock picks from the information technology sector. They far underperformed their peers comprising EWJ. Telecom services stocks proved an asset to FJPNX but couldn’t bring its total returns into positive territory.
The fund’s below-average performance is a big letdown and doesn’t make FJPNX a fund that could form the core of your Japanese investment.
In the next article, we’ll look at the Hennessy Japan Fund – Investor Class (HJPNX).