The largest equity fund of Fidelity International in Japan has tremendous faith that technology companies will be the main drivers of growth that will help strengthen the country's stock market in 2020.
According to Bloomberg reports, the Japan Growth Fund of the asset manager is up 30 percent this year, beating almost all of its competitors. The fund has been able to stay ahead of Japan's stock benchmarks' 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 makers and electronics. The firm 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 in 2020 the Nikkei stocks will try to breach the 25,000 marks," said Takashi Maruyama, head of Japanese equities at Fidelity International, in a Tokyo interview.
According to Maruyama, "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 key is to find 5G-related stocks that market participants still have to take into account the potential of the technology, he said.
This year, Fidelity's confidence in Japan's technology stocks was checked when trade disputes between the U.S. and China dampened profits from semiconductor firms and suppliers of electronic parts.
For Advantest Corp. the Nikkei 225's biggest gainer for 2019, these sectors eventually recovered to become some of the top performers this year.
"When the shares were down, we saw it as an opportunity to buy," said Maruyama, adding that analysts visit businesses every quarter this year.
While the Japan Growth Fund beat 95 percent of its peers in 2019, according to data compiled by Bloomberg, its rating slips when measured over a longer period. This fell for a three-year cycle to the 71 percentile and slipped for five years to the 68 percentile.
Shoko Shinoda, a fund strategist at the Tokyo-based Rakuten Securities, also lauded the Japan Growth Fund for its track record. Founded in 1998, it is considered to be a long-term fund that focuses on long-term stocks, she said.
To ensure the fund maintains its winning streak, Fidelity's Maruyama does not rule out non-technology stocks such as a Shimano Inc. that produces bicycles, rowing and fishing goods. The fund sees potential development for the electric bicycles of the firm.
Meanwhile, shares of Fidelity opened Friday's session at $22.90. The firm's 50-day moving average hit $22.39 while its 200-day MA is pegged at $21.52. The firm's exchange-traded fund value factor has a one-year low of $19.25 and a one-year high of $23.15.
