Japan Post’s deal will test interest rate optimism
28/02/2023 04:51
(The author is a Reuters Breakingviews columnist. The opinions
expressed are their own.)
HONG KONG, Feb 28 (Reuters Breakingviews) - The $12
billion triple initial public offering of the Japan Post Group
by the government in 2015 was done in the name of economic
efficiency. It has paid off less well for investors. After a
brief rally, the collective market value of the three companies
it comprises has declined from a peak of 18 trillion yen to
below 10 trillion yen, per Datastream. Despite high dividend
payouts, total returns have underperformed the Topix benchmark
and the Refinitiv Japanese bank index by double digits.
There is more rationalisation work to do. The Ministry of
Finance holds over a third of Japan Post Holdings 6178.T ,
which in turn retains big stakes in the banking and insurance
units – although it has trimmed the latter to below 50%. The
bank position is now being partly unwound to meet new minimum
tradeable share rules. Japan Post Holdings plans to unload
shares worth up to $9.3 billion, Reuters reported, reducing its
stake to below 65%. Investors will only be offered a small
discount of up to 4% because Japan Post Bank 7182.T may buy
back some of its own shares, and there is a possibility that
major indexes will increase allotments, which could buoy prices.
It’s a huge deal in a rickety market but the prospect of
interest rate normalisation could see more investment into
domestic banks – Japan Post Bank shares have rallied this year
alongside local peers. This deal will test how much nascent
optimism there is about that prospect. (By Pete Sweeney)
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(Editing by Una Galani and Thomas Shum)
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