ASIA MARKETS: Japan Capital-raising Fears May By Overblown
By V. Phani Kumar
Japanese stocks are suffering from concerns of upcoming share offerings
that would dilute the value of existing shares, but at least one leading analyst
sees these fears as overblown.
While capital-raising via stock offerings had been more of a worry for
investors in Japan's banks, recent announcements of share-sale plans by non-
financial companies -- such as Hitachi Ltd. and Nippon Yusen K.K. -- have
widened those fears across the broader market.
But Mizuho Securities' top strategist says these concerns may prove
ungrounded, as they don't take into account the improvement in fundamentals as
shown by corporate earnings in the during the July-September quarter.
Mizuho's Tomochika Kitaoka wrote in a report that the "unwarranted" market
fears have pulled down share prices ahead of the announcements, with the shares
bottoming after the details of capital-raising are known.
"This appears to reflect the many cases of the market pricing in dilution
ahead of capital-increase announcements, while viewing the actual announcements
as a potential catalyst for a share price rebound," said Kitaoka.
Among companies that announced capital-raising plans recently, Hitachi (HIT)
said it will raise up to 415.7 billion yen ($4.6 billion) by issuing shares and
convertible bonds.
Last week, Nippon Yusen detailed a plan to raise 142.5 billion yen from a new
share issue, while Mitsui Chemicals said it planned a 64.2 billion yen offer.
In Tuesday's trading, Hitachi shares fell 2.6% on top of Monday's 8.5%, with
Nippon Yusen (NYUKF) up 0.7% and Mitsui Chemicals (MITUY) down 0.4%.
While the stocks sales of Hitachi and others may seem large, they are
significantly below some of those planned by the financial sector -- in
particular, mega bank Mitsubishi UFJ Financial Group's reported plan to sell
about 1 trillion yen, or $11 billion, worth of stock.
Yet despite such a massive potential dilution, MUFG shares (MTU) advanced 0.6%
, after Monday's 5.5% tumble immediately following the weekend reports of its
purported capital-raising.
"In our view, the only companies that need to carry out equity financing deals
are those with severely impaired capital and financial institutions faced with
the specter of stricter capital adequacy standards," Kitaoka said.
He added that, although equity financing in Japan could reach about 7 trillion
yen during the current financial year ending March 31, a capital-raising of
about 2% to 3% of Japan's market capitalization doesn't appear to be "a
plausible reason" for the market's underperformance.
In wider market action, the Nikkei 225 Average dropped 0.4% to 9,753.35, with
Hong Kong's Hang Seng Index falling 0.4%, and Australia's S&P/ASX 200 shedding
0.4%.
China's Shanghai Composite rose 0.1%, South Korea's Kospi dropped 0.2%, and
India's Sensex slipped 0.2%.
(END) Dow Jones Newswires
11-17-090040ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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