Chern-Yeh Kwok, Head of Investment Management, Japan:
“The escalation of the Ukrainian conflict, and the impact that it has on global commodity prices, has put a chill on sentiment across global markets. While the direct impact on most Japanese corporates – including the Fund’s holdings – is minimal, the indirect impact from the sharp rise in commodity prices puts further pressure on companies’ profitability.
“Broadly speaking, companies are passing on higher prices to their end customers, but these actions will come with a lag, especially with the recent run up in prices. Meanwhile, the peaking of the sixth wave of Covid-19 cases in Japan should bolster a return to some normalcy after a tough year.
“With this backdrop, and with the rotation in the markets earlier in the year, valuations for quality stocks have fallen sharply, yet commentary from companies suggests that business fundamentals remain sound. Alongside structural improvements in governance in Japan, we remain resolute in our belief that these companies will outperform over the medium to longer term.”