The first quarter of 2008 was a further disappointment for investors in Japanese equities, with no sector ending in positive territory. Defensive sectors such as transport, food, beverages and tobacco and utilities were the most resilient while resources and real estate remained weak. The IMA Japan sector lost 7.1%* whilst the New Star Japan fund fell 9.7%*. After poor performance in January, the fund recovered ground in February and March.The largest positive contributor to the fund's performance was Fast Retailing, which gained 17.7% in response to strong spring clothes sales. Doutor Nichires was also one of the strongest contributors, with the coffee and restaurant chain being able to raise prices to offset increasing raw material costs.Olympus was purchased after its acquisition of Gyrus. Olympus now has a high share of the flexible and rigid endoscope markets, both of which are profitable and growing. Shiseido was purchased for its strong growth prospects in China. Profits were taken in Nintendo.The Japanese market outperformed other major markets in like currency terms but the yen's value was a significant factor during the quarter because it strengthened against the dollar to its strongest level since November 1995. Exporters were hit as concerns about companies achieving their full-year guidance became a factor among investors.Despite this, macroeconomic figures were solid, with machine orders, gross domestic product and industrial production all exceeding consensus forecasts and indicating growth; the Tankan business survey was weak, however, indicating a continued need for caution in portfolio construction.
134.50p
