WWRR Vol.2.017

Christopher Wood christopher.wood@clsa.com +852 2600 8516
As for the Japan long-only portfolio, introduced on 17 March 2005, it underperformed the Topix last
quarter on a total-return basis, declining by 20.8% in yen terms compared with a 17.6% decline in
the Topix. As a result primarily of last quarter, the portfolio also underperformed in 2018 declining
by 19.6% in yen terms compared with a 16% decline in the Topix. While in US-dollar terms, the
portfolio declined by 18% last quarter, compared with a 14.7% decline in the Topix. The portfolio
was down 17.4% in US-dollar terms on a total-return basis in 2018, compared with a 13.7% decline
in the Topix.
From a longer-term perspective, the Japan portfolio is now up 173.3% in yen terms and 160.3% in
US-dollar terms on a total-return basis since inception on 17 March 2005, while the Topix has risen
by 63.1% in yen terms and 55.4% in US-dollar terms over the same period (see Figure 25). This
translates into an annualised gain of 7.6% in yen terms since inception, compared with a 3.6%
annualised gain for the Topix.
Figure 25
Japan long-only thematic portfolio total-return performance vs Topix (in yen terms)
400
350
(17 Mar 05=100) Japan thematic portfolio total return
Topix total return index
300
250
200
150
100
50
Mar 05
Sep 05
Mar 06
Sep 06
Mar 07
Sep 07
Mar 08
Sep 08
Mar 09
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Mar 11
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Sep 12
Mar 13
Sep 13
Mar 14
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Mar 17
Sep 17
Mar 18
Note: Total-return performance in yen terms. Data up to 31 December 2018. Source: CLSA, Datastream
Sep 18
Finally a few words are due on gold. The gold-bullion price rose by 7.5% last quarter as Fed
tightening expectations reduced. As a result, gold was down only 1.6% in 2018. This followed the
13.1% rally in gold in 2017 (see Figure 26). The unhedged gold-mining index outperformed gold
bullion last quarter, rising by 13.8%. But it was still down 16.5% for the whole of 2018 (see Figure
27).
The really positive trigger for gold will be renewed Fed easing and the resulting realisation by the
consensus that the Fed will not be able to normalise monetary policy. But in the eyes of the
consensus such an outcome has now been delayed, if not abandoned altogether. If the consensus
proves to be wrong, gold-mining stocks remain the geared way of investing on such a Fed U-turn.
They are now trading at July 2003 levels when the gold price was around US$360/oz.
Thursday, 3 January 2019 Page 14