Foreign Institutional Ownership of Japanese Company Shares Declined in the Six Months Ended September 2010, Study Finds

New York (PRWEB) December 27, 2010

Foreign institutional ownership of Japanese stocks declined between March and September 2010, reversing an upward trend that occurred in the previous six months ended March 31, 2010, according to LS Global Advisory Group, a leading global shareholder identification and market intelligence research firm.

The decline in the most recent six months paralleled a drop in the overall Japanese equity market over that period, and also reflected the outlook for a continued weak Japanese economy going into 2011, the analysis showed. During the six months ended September 30, 2010, the Nikkei 225 Stock Index dropped by a considerable 15.5% , while the broader Tokyo Stock Exchange’s Topix Index fell 15.3%.

The analysis was based on shareholder data compiled by LS Global for its Japanese-based client corporations, as well as for financial and advisory firms around the world. It covers a large number of Japanese companies that are components of either the Nikkei 225 Index or the Topix Index.

Results of the Analysis

The analysis showed a 6% drop in foreign institutional ownership of Nikkei 225 stocks represented in the sample over the six months ended September 30, 2010. For Topix component companies in the sample, there was a 4% decline in foreign institutional share ownership for the same period.

At the end of March 2010, according to a benchmark survey from the Tokyo Stock Exchange and other exchanges, a significant 26.0% of the shares of listed Japanese stocks were owned by foreign investors.

“Based on the results of the LS Global survey, we estimate that foreign ownership of listed shares on the Tokyo Stock Exchange fell to a range of between 24% and 25% by September 30, 2010,” said Lucas Scheer, president of LS Global Advisory Group.

Reasons for the Retreat

Poor investment performance in the Japanese markets, a weak economic outlook and a highly valued yen vs. the dollar were key reasons why foreign institutions retreated from the Japanese market in the six months ended September. For example, data from hedge fund research firm EurekaHedge show that, among all geographic regions, hedge fund returns for the nine months through September 2010 were weakest for investments in Japan (more than 1%), compared with much better returns for investments in the other regions: Asia ex-Japan and Latin America (about 6% each), North America (nearly 6%), and Europe (nearly 4%), with the EurekaHedge Global Index returning more than 5%.

While the estimated decline in foreign share ownership during the six months ended September 2010 was modest, it was in marked contrast to the ownership gains observed in the previous six-month period, September 30, 2009 to March 31, 2010, when the Japanese equity market rose significantly. During that period the Nikkei 225 Index jumped 9.4% and the Topix Index gained 7.6%.

“The Japanese markets, as a reflection of the Japanese economy, have been going through turmoil the past couple of years, and institutional investors are understandably nervous when they see returns plummet, with little good news on the horizon,” Scheer explained. .

“Our job is to help clients to more effectively communicate their message to current and prospective investors,” he added. “By doing it well, we can help companies to strengthen their ties with their shareholders.”

When Will Foreign Investors Return to Japanese Equities?

The Japanese economy has been suffering from weak demand in both the domestic and export markets, the latter being held back by slow demand in major customer countries, including the U.S., as well as by the high value of the yen versus the dollar. This has held back investment performance and a return to growth of foreign investment in this market.

In November and December, the Japanese equity markets performed much better, and in addition, the yen declined against the dollar. But given the uncertain domestic economic outlook, many observers viewed the latest upturn as a trading opportunity to lock in profits, rather than an expectation of a full-blown return to a stronger economy and an increase in foreign money moving into Japanese shares.

For many observers, the economic and market outlook for Japan in 2011 remains sluggish. For example, Koichi Iaji, director of economic research at the NLI Research Institute, recently projected growth of just 1.4% in Japan’s real GDP in the coming year. And Darrel Whitten, a well-known analyst who closely follows the Japanese market and runs The Japan Investor (http://www.japaninvestor.com) website, recently forecast that the Japanese market will “continue to bring up the rear” in terms of regional investment performance, though he suggested that the Japanese markets could perform well for a period during the coming year.

Still, there may be some bright spots. Kathy Matsui, chief Japan equity strategist for Goldman Sachs in Tokyo, sees some “cyclical opportunities” in the year ahead, especially from a better U.S. economy (a key market for Japanese autos and technology products). She forecast that the Topix Index will rise 20% in the year’s first half, before subsiding.

A rising market, even for part of the year, may help to bring more foreign institutional money back into Japanese stocks.

“One significant finding of interest in Japanese equities in 2010 are investments by Chinese sovereign wealth funds, which have already grown to over 1 trillion yen,” Scheer said. “We view this as a positive development, which is likely to provide support for further investments in Japanese shares.”

About LS Global Advisory Group

LS Global Advisory Group is a leading provider of shareholder identification and market intelligence services on a global basis. This crucial information helps client companies to communicate more effectively with their current and prospective shareholders, as well as the investment community as a whole. Formed in 2006 by 20-year industry veteran Lucas Scheer, the firm has quickly become a leader in identifying institutional investors in corporate stocks around the world. For assignments in many developed markets, LS Global typically identifies over 90% of the institutional ownership of a client company’s share capital – a track record that other industry firms find hard to duplicate. LS Global operates across all major industrial countries, and in addition to shareholder identification, it provides stock surveillance, institutional targeting, activist investor monitoring and consulting, and debt-holder identification services. For additional information about LS Global Advisory Group, please visit our website, http://www.LSGlobalAdvisory.com, or contact President Lucas Scheer at (212) 430-3782 or info(at)lsglobaladvisory(dot)com.

###

©Copyright 1997-

, Vocus PRW Holdings, LLC.
Vocus, PRWeb, and Publicity Wire are trademarks or registered trademarks of Vocus, Inc. or Vocus PRW Holdings, LLC.

Foreign Institutional Ownership of Japanese Company Shares Declined in the Six Months Ended September 2010, Study Finds

New York (PRWEB) December 27, 2010

Foreign institutional ownership of Japanese stocks declined between March and September 2010, reversing an upward trend that occurred in the previous six months ended March 31, 2010, according to LS Global Advisory Group, a leading global shareholder identification and market intelligence research firm.

The decline in the most recent six months paralleled a drop in the overall Japanese equity market over that period, and also reflected the outlook for a continued weak Japanese economy going into 2011, the analysis showed. During the six months ended September 30, 2010, the Nikkei 225 Stock Index dropped by a considerable 15.5% , while the broader Tokyo Stock Exchange’s Topix Index fell 15.3%.

The analysis was based on shareholder data compiled by LS Global for its Japanese-based client corporations, as well as for financial and advisory firms around the world. It covers a large number of Japanese companies that are components of either the Nikkei 225 Index or the Topix Index.

Results of the Analysis

The analysis showed a 6% drop in foreign institutional ownership of Nikkei 225 stocks represented in the sample over the six months ended September 30, 2010. For Topix component companies in the sample, there was a 4% decline in foreign institutional share ownership for the same period.

At the end of March 2010, according to a benchmark survey from the Tokyo Stock Exchange and other exchanges, a significant 26.0% of the shares of listed Japanese stocks were owned by foreign investors.

“Based on the results of the LS Global survey, we estimate that foreign ownership of listed shares on the Tokyo Stock Exchange fell to a range of between 24% and 25% by September 30, 2010,” said Lucas Scheer, president of LS Global Advisory Group.

Reasons for the Retreat

Poor investment performance in the Japanese markets, a weak economic outlook and a highly valued yen vs. the dollar were key reasons why foreign institutions retreated from the Japanese market in the six months ended September. For example, data from hedge fund research firm EurekaHedge show that, among all geographic regions, hedge fund returns for the nine months through September 2010 were weakest for investments in Japan (more than 1%), compared with much better returns for investments in the other regions: Asia ex-Japan and Latin America (about 6% each), North America (nearly 6%), and Europe (nearly 4%), with the EurekaHedge Global Index returning more than 5%.

While the estimated decline in foreign share ownership during the six months ended September 2010 was modest, it was in marked contrast to the ownership gains observed in the previous six-month period, September 30, 2009 to March 31, 2010, when the Japanese equity market rose significantly. During that period the Nikkei 225 Index jumped 9.4% and the Topix Index gained 7.6%.

“The Japanese markets, as a reflection of the Japanese economy, have been going through turmoil the past couple of years, and institutional investors are understandably nervous when they see returns plummet, with little good news on the horizon,” Scheer explained. .

“Our job is to help clients to more effectively communicate their message to current and prospective investors,” he added. “By doing it well, we can help companies to strengthen their ties with their shareholders.”

When Will Foreign Investors Return to Japanese Equities?

The Japanese economy has been suffering from weak demand in both the domestic and export markets, the latter being held back by slow demand in major customer countries, including the U.S., as well as by the high value of the yen versus the dollar. This has held back investment performance and a return to growth of foreign investment in this market.

In November and December, the Japanese equity markets performed much better, and in addition, the yen declined against the dollar. But given the uncertain domestic economic outlook, many observers viewed the latest upturn as a trading opportunity to lock in profits, rather than an expectation of a full-blown return to a stronger economy and an increase in foreign money moving into Japanese shares.

For many observers, the economic and market outlook for Japan in 2011 remains sluggish. For example, Koichi Iaji, director of economic research at the NLI Research Institute, recently projected growth of just 1.4% in Japan’s real GDP in the coming year. And Darrel Whitten, a well-known analyst who closely follows the Japanese market and runs The Japan Investor (http://www.japaninvestor.com) website, recently forecast that the Japanese market will “continue to bring up the rear” in terms of regional investment performance, though he suggested that the Japanese markets could perform well for a period during the coming year.

Still, there may be some bright spots. Kathy Matsui, chief Japan equity strategist for Goldman Sachs in Tokyo, sees some “cyclical opportunities” in the year ahead, especially from a better U.S. economy (a key market for Japanese autos and technology products). She forecast that the Topix Index will rise 20% in the year’s first half, before subsiding.

A rising market, even for part of the year, may help to bring more foreign institutional money back into Japanese stocks.

“One significant finding of interest in Japanese equities in 2010 are investments by Chinese sovereign wealth funds, which have already grown to over 1 trillion yen,” Scheer said. “We view this as a positive development, which is likely to provide support for further investments in Japanese shares.”

About LS Global Advisory Group

LS Global Advisory Group is a leading provider of shareholder identification and market intelligence services on a global basis. This crucial information helps client companies to communicate more effectively with their current and prospective shareholders, as well as the investment community as a whole. Formed in 2006 by 20-year industry veteran Lucas Scheer, the firm has quickly become a leader in identifying institutional investors in corporate stocks around the world. For assignments in many developed markets, LS Global typically identifies over 90% of the institutional ownership of a client company’s share capital – a track record that other industry firms find hard to duplicate. LS Global operates across all major industrial countries, and in addition to shareholder identification, it provides stock surveillance, institutional targeting, activist investor monitoring and consulting, and debt-holder identification services. For additional information about LS Global Advisory Group, please visit our website, http://www.LSGlobalAdvisory.com, or contact President Lucas Scheer at (212) 430-3782 or info(at)lsglobaladvisory(dot)com.

###

©Copyright 1997-

, Vocus PRW Holdings, LLC.
Vocus, PRWeb, and Publicity Wire are trademarks or registered trademarks of Vocus, Inc. or Vocus PRW Holdings, LLC.

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