Mrs Watanabe joins activist investors to shake up Japan Inc
03/04/2019 24:39
* International activists to meet Japanese individual
investors
* Domestic investors own 17 pct of Japanese stocks
* Shareholder activism slowly catching on in Japan
* Activists seek higher shareholder returns, governance
reform
By Tomo Uetake
TOKYO, April 3 (Reuters) - Foreign activist investors who
have long complained about Japanese companies' cash-hoarding and
stingy payouts to shareholders may have found an unusual ally --
Japanese retail investors.
Market activism has historically been low-key in Japan but a
drive by Prime Minister Shinzo Abe to get investors to be more
assertive in their demands for shareholder value has slowly
changed this.
That push may pick up momentum in May when representatives
from some activist funds, both foreign and domestic, meet
hundreds of Japanese retail investors in Tokyo at an event
organised by an online broker, a month before the peak of
Corporate Japan's annual general meeting (AGM) season.
Such a meeting would have been unheard of in the past,
market players say, in a country where offshore activists were
seen as "foreign vultures" seeking to pillage precious corporate
savings.
"There have always been sceptical views that 'hostile'
activism can't be as successful in Japan as it is in the United
States," said Hiroki Tsujimura, chief investment officer (CIO)
at Nikko Asset Management. "However, given the rapidly changing
environment, we have started to see successful activists'
campaigns recently."
The country's retail investors hold about one sixth of
domestic shares and are colloquially known as Mrs Watanabe, a
reference to the archetypical Japanese housewife and her
household investments.
Japan Inc has managed to weather pressure from shareholder
activism thanks to still large institutional cross-share
holdings. A joint front between foreign activists and domestic
retail investors, however, could increase pressure on
management.
Already, there are signs of change: the number of companies
that had proposals from shareholders at AGMs increased to more
than 50 by 2017 from below 30 in 2011, according to Daiwa
Institute of Research (DIR).
Those proposals include calls for higher dividend payouts,
selling non-core assets, and changing the structures of
executive boards.
While such proposals are usually voted down, support for
them has increased in recent years, putting pressure on company
management, and in some cases, prompting companies to adopt some
of the suggestions.
In a recent example, investors in housing products maker
Lixil Group 5938.T last month called for the ouster of top
management, citing concerns about corporate governance.
urn:newsml:reuters.com:*:nL3N2172OU
Foreign funds hope the May 19 meeting, hosted by securities
broker Monex Group 8698.T , will help promote the needs of
retail investors, who collectively own 1,830 trillion yen
($16.5 trillion) of assets, including 96 trillion yen in listed
Japanese stocks.
"The best scenario is that retail shareholders increasingly
vote for good shareholder proposals that add value to companies,
and increase corporate values across the board," said Seth
Fischer, founder and CIO of Hong Kong-based Oasis Management,
who plans to take part in the meeting.
Fischer sees the meeting as a good opportunity to discuss
ideas with retail investors.
Zuhair Khan, head of Japan research at Jefferies, thinks
activism can help boost the value of Japanese shares, which
currently trade at just 1.1-1.2 times their book value.
He expects even modest success in corporate reforms could
boost shares to 2-times their book value.
"The upside to the Japanese stock market of improved
governance is huge," Khan said.
Monex Group, the organiser of the meeting, said the response
from international activist funds has so far been promising.
Oki Matsumoto, founder and chairman of Monex, said increased
co-operation could be a win-win for both retail investors and
institutional activists.
"I hope the meeting will have some positive impact on voting
at AGMs this year," Matsumoto said.
($1 = 111.30 yen)
(Reporting by Tomo Uetake; Editing by Hideyuki Sano and Sam
Holmes)
((tomo.uetake@thomsonreuters.com; +81-3-6441-1645; Reuters
Messaging: tomo.uetake.thomsonreuters.com@reuters.net))