Japan into Aust, market

Press, 2 May 1981, Page 20

Japan into Aust, market

PA Sydney Japanese stockbrokers, life offices, and trust companies have embarked on a course which is likely to see Japanese investors take an increasingly important role in Australian equity markets during the next few years. A decision by the Japanese Government to allow the overseas investment of the country’s burgeoning pool of pension funds has already lead three of Japan s big-four brokerage firms — Nomura securities, Yamaichi securities. and Daiwa securities — to open formal offices in Sydney since October. The fourth member of the group. Nikko securities, plans to open a formal office in the next few months. All four companies have been active in Australia for the last seven or eight years, mainly in the field of arranging yen-denominated bonds on the Japanese bond market for Australian semi-govern-ment authorities.

However, spokesmen for the firms acknowledge that their new level of activity is designed to service increasing demand for Australian shares by Japanese investors — and they hope to encourage more Australian investment in the booming Tokyo stock market while they're at it. “Australia has some very interesting and attractive companies and ones which we can’t have in Japan, that is the resource-oriented ones, although we believe that these stocks are sometimes overvalued in terms of {triceearnings ratios.” says Yukio Hara. Yamaichi's chief representative in Sydney. Figures supplied by the Japanese Securities Dealers Association show that Japanese brokers handed a bow 10.6 M shares worth about ?36.4M in the first 11 montht of 1980, the last period fot which figures are available. In 1979, business involvec 2.3 M shares worth about

?4.6M. and two yeais earlier, only about 844.000 shares w'orth about 52.2 M were bought and sold. The figures show that the percentage of Australian shares in the total handling ol foreign equities by Japanese brokers rose from aboui one per cent in 1977 to abounine per cent in 1980. Mr Hara says that privatt individuals were responsible for most of the sharemarke investment in spite, of histori cal trading levels on th< petro-dollar-rich Tokyo mar ket. “Interest in Australia! markets is increasing very rapidly." says Takashi Yamaguchi. chief representative of Sumitomo trust, which opened an office in Sydney in March. “There are very large amounts in pension funds in Japan and as these funds are increasing very rapidly we would like to diversify our investments, especially overseas."

Mr Yamaguchi said that most pension fund investment overseas so far had gone to markets in-- the United States and Europe. "People have just begun to study the Australian market, but in the future some money will come" he says. “At the beginning this could be very small but the pension funds are expanding rapidly, so in the futiire it could be a large amount." Brokers say that the biggest problem with investing in the Australian sharemarket is its relatively small size and. by Japanese standards. thin turnover. Junseuke Ikegame. Nikko's representative in Sydney, says that Japanese brokers are afraid they will upset Australian markets if a flood of capital is unleashed. “For this reason we want to move slowly, but gradually we will be increasing our activity, and in two to five years it might be considerably increased.” he says.