Fidelity’s top Japan fund betting on 5G to boost the stock market by 2020

The largest equity fund of Fidelity International in Japan is betting technology companies that will help boost the stock market of the nation by 2020.


According to Bloomberg reports, the Japan Growth Fund of the asset manager is up 29 percent this year, beating almost all of its peers. The fund has been able to stay ahead of Japan’s market indices ‘ annual returns most of the year.


The $3.7 billion funds from Fidelity Investments credits the performance of 2019 to investments in growth stocks such as computer manufacturers and electronics. It expects 2020 to be another strong year, with the Nikkei 225 stock average increasing from current levels by an additional 5 percent.


“We think that at some point next year the Nikkei will try to reach 25,000,” said Takashi Maruyama, head of Japanese equities at Fidelity International, in a Tokyo interview. “There are opportunities in 5G-related stocks, especially in areas that have not been priced in the markets.” Maruyama believes that demand for smartphones using the technology would spur business for manufacturers of components. The aim will be to identify 5G-related stocks that market participants still have to adapt to the potential of the technology, he said.


“I think you can really see it,” he said. “How much 5 G will be used in Japan may still be uncertain, but there is a potential.” This year, Fidelity’s confidence in Japan’s technology stocks has been checked as trade disputes between the US and China have dampened the earnings of semiconductor-related companies and parts manufacturers. Both industries eventually recovered to become some of the top performers this year, with Advantest Corp. among the biggest winners for 2019 in the Nikkei 225.


“When the shares dropped, we saw it as an opportunity to buy,” said Maruyama, adding that analysts visit businesses every quarter as often as once.


Miura Co., an advanced boiler manufacturer that has seen its shares rise over 50 percent this year, is among its top picks. The fund expects environmentally friendly boilers to be developed by the company to attract demand from China and developing Asian countries.


While the Japan Growth Fund beat 95% of its peers in 2019, according to data compiled by Bloomberg, its rating slips when measured over a longer period. This fall for a three-year cycle to the 71st percentile and slips for a five-year span to the 68th percentile.


“I’d like to see a more consistent performance, to be honest,” said Shoko Shinoda, a fund analyst at Tokyo’s Rakuten Securities. “It was too bumpy in the last couple of years.”