A good half for shares of Japanese smaller companies helped Ballie Gifford's Shin Nippon investment trust outstrip both the broader Japanese market and also most major world markets.

The Japanese small cap -focused trust's NAV rose by 9.7% in the half year to July to 153.5p, compared to a rise of 6.0% in sterling terms in the benchmark MSCI Japan Small Cap index. Sterling returns over the period benefited from the strengthening yen, Ballie Gifford said.

The manager added the good relative performance was helped by its picking stocks in the Consumer Discretionary, Healthcare and Industrial sectors.

"Japanese smaller company valuations remain close to historic lows, despite a period of good earnings performance. This divergence between share price performance and profit generating ability has resulted in an increase in corporate activity over the last few months," it commented.

"While year-on-year growth rates are slowing due to the improvement in conditions over the course of last year, exports, notably to China and the rest of Asia, continue to increase. Business and consumer sentiment indicators are either buoyant, or recovering, and there are tentative signs that conditions in the real estate sector are improving as the availability of financing increases," it added.

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