Japan companies hog the spotlight as hedge funds tout their top Asia picks

HD Hyundai Electric Co

24/05/2024 07:17

By Summer Zhen and Xie Yu
       HONG KONG, May 24 (Reuters) - Japanese stocks were in
focus at a hedge fund conference this week, accounting for most
of the top Asia investment ideas as asset managers highlighted
Japan Inc's efforts to improve capital efficiency as well as the
record run for Tokyo shares.
    At the annual Sohn Hong Kong Investment Leaders Conference
which invites 14 funds to pitch their top investment ideas,
Japanese companies in outsourcing, robotics and the drug sector
were in favour. Only two funds pitched ideas on Chinese stocks,
down from seven in 2023. 
    The biggest opportunities in the world's third-largest
economy are in companies with "improving stories" or are
bolstering corporate governance, rather than firms that are
already excellent, according to David Mitchinson, founding
partner at London-based Zennor Asset Management.
    Mitchinson recommends Transcosmos  9715.T  which provides
outsourcing services and is likely to benefit from Japan's tight
labour market. The firm's growth has slowed but it has shown
willingness to improve capital management such as its plan to
cancel treasury shares, he added.
    While Japan has been bolstering governance for at least a
decade, the effort got a big shot in the arm last year when the
Tokyo Stock Exchange called on companies to improve capital
efficiency. The bourse now publishes a monthly list of firms
that have voluntarily disclosed plans to improve their use of
capital.
    Also helped by a weak yen, the benchmark Nikkei  N225.T  
has surged 50% since the beginning of 2023, hitting a record
high in February this year.
    Japan's government continues to raise the bar for
management, so "investors who engage with Japanese companies
have a lot higher chance of winning than ever before," Seth
Fischer, founder of activist fund Oasis Management, said in an
interview ahead of the conference. 
    The fund sees upside potential for Kobayashi Pharmaceutical
 4967.T , a drugmaker which recently recalled a health
supplement after five deaths possibly linked to the product.
Fischer told the conference the stock could climb if there was
improved crisis management or if it went private.
    Oasis could step in if there was no "self-improvement", he
said, without disclosing if Oasis has shares in Kobayashi.
    Hong Kong's Tybourne Capital Management said it is betting
that Samsung Electronics  005930.KS  can grab global memory chip
market share from rival SK Hynix  000660.KS , which has much
production capacity in China that it might not be able to make
full use of amid geopolitical tensions.
    CloudAlpha Capital Management, also from Hong Kong, is
bullish on South Korea's HD Hyundai Electric  267260.KS , citing
AI-linked demand for electricity equipment.

 (Reporting by Summer Zhen and Xie Yu; Editing by Edwina Gibbs)
 ((summer.zhen@thomsonreuters.com; 852-3462-7739;))