Business / Financial Markets

Stock market fallout from Murakami probe seen limited

by Yuko Takeo

Bloomberg

Japan stock watchers say the fallout from an investigation of Yoshiaki Murakami for market manipulation will be limited.

The Securities and Exchange Surveillance Commission started a probe into the famous investor this week, according to an official at the market watchdog. While companies that Murakami has stakes in have tumbled, Sompo Japan Nipponkoa Asset Management Co. and Daiwa SB Investments Ltd. say the scandal won’t affect other equities nor detract from the nation’s efforts to overhaul corporate governance.

“There might be some effect on shares that they’re investing in, but it won’t weigh on the overall market,” said Kenji Ueno, a senior investment manager at Sompo Japan Nipponkoa Asset Management in Tokyo, which oversees ¥1.4 trillion ($11.4 billion). “I can’t comment on the investigation itself, but at a time when dialogue with investors is being talked about, Murakami is a person of the past. The corporate governance that’s being pushed forward now is a little more sophisticated.”

The SESC raided the homes of Murakami and daughter Aya on Wednesday morning, according to an NHK report. Some of the alleged manipulation was through short-selling shares of clothing company TSI Holdings Co. and then buying them back, the Nikkei newspaper reported, without saying where it got the information. TSI Holdings shares were unchanged as of Thursday.

Murakami, a former trade ministry bureaucrat, became a celebrity figure in the Japanese financial world after starting his own investment fund in 1999 and pressing cash-rich companies to change as one of the country’s earliest champions of shareholder rights. In 2007, Murakami was convicted on charges that he bought shares in a broadcaster after learning that Internet entrepreneur Takafumi Horie’s Livedoor Co. planned to make a hostile bid for its control. Murakami was sentenced to two years in prison, which was suspended on appeal.

The investor returned to shareholder activism in Japan this year after a long absence. In August, Murakami failed to win approval from Kuroda Electric Co. stock owners for his proposal to appoint four outside directors, including himself, to the company’s board. Other holdings include Sanshin Electronics Co., Accordia Golf Co. and Excel Co., according to filings.

The investigation will do little to derail Japan’s biggest overhaul of corporate governance in decades, according to Soichiro Monji, chief strategist at Daiwa SB in Tokyo, which oversees ¥5.8 trillion in assets. Japan started rules for companies in June after beginning a similar code for investors last year.

“The authorities are simply investigating as there’s a need. It’s nothing more or less than that,” Monji said. “The issue for corporate governance in Japan isn’t really company scandals, but whether firms can truly raise return on equity and use outside directors.”

A spokesman for the SESC declined to comment or be identified, citing the agency’s policy. Phone calls and emails to the Murakami family’s office in Tokyo went unanswered.

“I don’t know if there was any political motivation” in the investigation, said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo. “He was probably an eyesore for the authorities in many ways. Many hedge funds do similar trading, where they sell excessively then buy back.”

Both Daiwa SB’s Monji and Sompo Japan’s Ueno referred to Murakami as a person “of the past” as they played down the significance of the probe. The nation’s corporate governance has moved on from simply making demands of companies, according to Ueno.

“I don’t think Mr. Murakami’s investigation will reduce trust in the Japanese stock market,” Monji said.

Coronavirus banner