Japan still good place to invest: Nikko Asset

by Tomoko Yamazaki

Bloomberg

Despite the possibility that the government may block a hedge fund’s bid to increase its stake in a power utility, Japan remains an attractive place to invest because of low valuations, Nikko Asset Management Co.’s president said recently.

Bill Wilder, who more than doubled Nikko’s assets to $120 billion since joining from Fidelity Investments in 2004, said Japan has “some of the premier companies” in the world based on measures such as price-to-book ratios and earnings prospects.

The government for the first time cited national security concerns in opposing a bid by London-based The Children’s Investment Fund Management LLP (TCI) to double its stake in Tokyo-based Electric Power Development Co., known as J-Power.

Wilder disagrees that the rejection signals Japan has closed its doors to foreign investors.

“We’re just not going to stand idly by and hear somebody say Japan is not a friendly place to invest,” Wilder, 58, said Thursday in an interview in Tokyo. “Japan is a really good place to invest in. You can’t ignore the world’s second-largest economy and call yourself a serious investor.”

Japan last month advised TCI to drop its bid for a bigger stake in J-Power, Japan’s biggest power wholesaler.

TCI rejected the advice, arguing the government’s review process “lacked transparency and integrity” and relied on “factually erroneous information.”

A final decision by the government on whether to accept or reject TCI’s request is expected next week.

Demand from pension funds and institutional investors for Japanese stocks is on the rise, Wilder said.

In the past nine months alone, Nikko Asset, Citigroup Inc.’s Japanese funds unit, has added about $2 billion in local assets for investors in Europe, the Middle East and North America, he said.

Overseas investors bought more Japanese shares than they sold in April, according to data compiled by the nation’s exchanges.

The investors bought a net ¥820.5 billion in shares in trading on the Tokyo, Osaka and Nagoya securities exchanges, the most since net purchases of ¥1.1 trillion in June, according to the data.

“That too much of Tokyo is trading at a discount to book value is an argument value investors make frequently, and a worthwhile one,” Paul Migliorato, an analyst at NamiNori LLC, a Honolulu-based equity research firm, said in a report Friday.

Of more than 1,700 companies on the Tokyo Stock Exchange’s first section, 125 are trading at price-to-book ratios of 0.50 or less, according to Migliorato. A ratio of less than 1 indicates the stock is trading below the firm’s market value divided by shareholder equity.

Shares of companies on the benchmark Topix index trade at an average of 1.46 times book value, compared with 2.63 times for the Standard & Poor’s 500 Index and 1.83 times for shares in the Dow Jones Stoxx 600 Index of European companies.

“The long-term story for Asia is still a compelling one, and we continue to see money come this way,” Wilder said.