Baillie Gifford Shin Nippon board have said they are ‘disappointed by the weak performance’ in the six months to 31 July 2022 as NAV per share fell by 4.8%, while the benchmark MSCI Japan Small Cap Index rose 0.9%.
The Baillie Gifford Shin Nippon share price fell by 9.9% as the discount to NAV widened.
During the period, Shin Nippon share price fluctuated from a premium of 1.5% to a discount of 8.9%, averaging a discount of 4.0%.
The Shin Nippon team attributed the underperformance to prior outperformance and weakness in internet and semiconductor related companies.
Baillie Gifford Shin Nippon’s top holdings include Torex Semiconductor, robotics focused Harmonic Drive and motorcycle manufacturer Shoei.
Japanese Economy
Baillie Gifford Shin Nippon is operating in an environment influenced by global inflationary pressures, yet one that has only seen Japanese inflation rise to 3%.
However, measures by the Bank of Japan to keep rates low – while most other major central banks are hiking – has led to a weakening Yen, and intervention to help strengthen the currency. A weaker Yen is not conducive to investment in smaller companies and the focus of the Shin Nippon portfolio.
Nonetheless, a 40% decline in Baillie Gifford Shin Nippon over the past year will leave not only the board feeling disappointed, but investors who have become accustomed to strong returns from the trust.
Baillie Gifford Shin Nippon has a total return of 308% over the past ten years.