Golf market slumps

Press, 30 November 1987, Page 16

Golf market slumps

From an “Economist” correspondent in Tokyo

WHO says Japanese markets can't crash? The country’s most esoteric one — secondary trading in golf-club memberships — has fallen far more painfully than the Tokyo stockmarket. If an investor had bought a Share in Japan’s most expensive company, Nippon Telegraph and Telephone, when it first came on the market in February, it would have cost him about $19,000. He could have sold it this week for about $32,000, admittedly less than its peak of about $33,000 but still a profit. If the same investor had bought a membership in February of Japan’s most expensive golf club, Koganei, near Tokyo, it would have cost him about $4.4 million. If he had sold it this week, he would have got only about $3.7 million.

It is tricky to work out the underlying asset value of a golf-

club membership. In Japan a club member is a co-owner of the land that the club occupies. Land around Tokyo is fabulously expensive. Then there is an unquantifiable prestige of being able to rub golf bags with Japan’s elite. But if ever a market looked overblown, it was that for golfclub memberships. Between 1982 and early this year while the Tokyo stockmarket’s Nikkei 225share index merely tripled,; prices for golf-club memberships increased tenfold. Golf-club membership brokers say prices have fallen "drastically” since the stockmarket started falling in mid-October. The most expensive clubs have fallen most. Membership of Totsuka, a club south of -Tokyo, now costs about $1.2 million, less than half as much as it did earlier in the year. Some brokers are talk-

ing of a “long-overdue correction” (sounds familiar?) and are trying to stir up bargain hunting. Perhaps with some success. The market has gone dead, except for memberships selling for less than $59,000. -But the crash hurts the 300-or-so brokers because, November is usually a peak month for trading in golfclub memberships. On a membership for Koganei, a broker used to expect a $360,000 spread between the buying and selling price. < There clearly is a connection between the, fallen bourse and fallen Koganei. Some brokers report that the clients have been selling golf-club memberships to cover stockmarket losses, and to meet margin calls. Better a slice on the course than a slice off the stockmarket. Copyright — The Economist