Tokyo exchange handling foreign investment surge
Everyone is smiling these days in Japanese securities companies when the subject of foreign investment is raised. Middle East oil money and Western annuity fund in search of profits have been flowing into Japan at an accelerated pace in recent weeks. This is in line with the yen's unexpectedly sharp appreciation against the dollar.Skip to next paragraph
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Foreign investment is regarded as the main factor in the record high set recently by the Tokyo stock exchange's "Dow Jones average" and the upward turn of bond market quotations after several months in the doldrums.
Kiichiro Kitaura, chairman of Nomura Securities Company, predicts that an estimated $6 billion in oil money ablone will stram into the stock and bond markets this year, and he adds: "I doubt the boom will end for some considerable time."
At the end of April, the Finance Ministry reported that yen assets in foreign hands had risen eightfold in five years, to top $40 billiom -- of which $23 billion was invested in Japanese stocks and bonds.
Analysts say this is not only international recognition of the strength of Japanese industry but also shows confidence in its ability to cpe with the economic problems lying ahead in the 1980s.
After stagnation last year, foreign buying of stocks on the Tokyo exchange's first section picked up dramatically in January.
In that month, buying exceeded selling by a record 42.6 billion yen. Activity then tapered off as US interest rates soared and the yen declined, but picked up again in April, when net purchase of stocks reached 34 billion yen.
Analysts say the bulk of the money is from Middle East oil producers and the operators of annuity funds in the United States and Western Europe seeking to diversify as a hedge against inflation.
The major securities companies themselves are claiming much of the credit for the recent good performance. Not only have they been providing daily stock and bond price quotations through their overseas offices, but many have organized investment seminars in a number of countries over the past year.
The Japanese have been going after investment funds more aggressively in the Middle East in particular.
One securities copany man recalls his surpsire during a recent tour of Saudi Arabia when he "found that representatives of four other Japanese financing companies had already visited one particular agency that day before we made our own call."
Experts now rate Japan second only to West Germany for investment in stocks and bonds, and there is considerable expectation that a good deal more money from American annuity funds will be attracted in the future.
Tokyo stock exchange analysts say most of the foreign investments is being channeled into blue-chip stocks of consumer electronics and precision machinery makers with good business prospects, as well as giant capital stocks like the Nippon Steel Corporation .
For the coming decade, a number of the leading securities firms say, the best ivestment prospects will be in electronics, fine chemicals, aircraft construction, and heavy oil cracking.
Japan's semiconductor technology is now more than able to challenge US domination, while companies producing videotape recorders also have a bright future.
With Japan's defense budget growing under American nudging, domestic aircraft manufacturers are also considered rising stars on the stock market board.
Foreign investment has also revived the ailing bond market, which suffered a major crisis lasty year because of a sharp drop in the price of government bonds , for what the securities companies blame excessive issuace. Losses on government bonds held by major banks here in fiscal 1979 are estimated at over $ 2 billion.
The situation looked grim as American and European interest rates soared, but with the trend reversed, the bond market rallied in April, encouraged also by the yen's sharp turnabout and a government decision to improve the final yield to subscribers.
As a result, no trouble is expected in finding takers for the estimated $55 billion worth of government bonds to be issued this year, nor the private bond issues, particularly those by the steel and electric power industries.
Saudi Arabia, for example, has already indicated it will buy $200 million worth of government bonds each month.