Despite talk that better shareholder sentiment is boosting Japan's stock market, the top five perfor...
Despite talk that better shareholder sentiment is boosting Japan's stock market, the top five performers in the Nikkei 225 do not pay dividends.
Investors in Isuzu Motors at the start of 2003 would have seen their shares rise by more than 400% in yen terms by 18 August, almost double the return of the next top performing stock listed in the Nikkei 225.
The company has posted gains of 429.27% so far this year and is up 280.7% over the past six months to the same date. The stock closest to it in performance terms, Mizuho Trust & Banking, is up 260% in yen terms from the end of December to 18 August. The remainder of the top five, Sumitomo Heavy Industrials, Chiyoda and Clarion, gained 239%, 218% and 211% respectively. All have discontinued the payment of dividends.
Yet, the worst performer over the past eight months, Sony, continues to offer semi-annual dividend payments. The stock has lost 24.6% of its value, in yen terms from the end of December to 18 August.
In June, Bloomberg reported that Katsuaki Furutachi, who helps manage some $3.4bn in equities for Asahi Life Asset management, as saying investors are becoming optimistic that more companies will start to pay dividends.
Neiloy Ghosh, manager of the SocGen Japan Growth unit trust, is also positive on dividends. He says the Japanese corporate sector has been able to cut costs and provide rising earnings and cashflow, some of which is being passed to the shareholder in the form of increased dividend yield.
Sentiment on the Japanese stock market has been positive though, with the indices reaching a 12-month high on 18 August.
Anne Marie Main, head of Japanese research at Scottish Widows Investment Partnership, says the best-performing sectors have been securities houses, electrical machinery, iron and steel and machinery, with the worst performers being largely defensive sectors such as warehousing, utilities, foods and pharmaceuticals.
Some companies recently reported first-quarter results that have given some credence to the recent rally in technology stocks, she notes. However, the picture remains patchy with Sony and Fujitsu posting disappointing figures, she adds.
'The corporate sector's financial position has improved and there are some signs that the labour market is starting to recover, which may, in time, lead to firmer household incomes and spending. A recovering trend in corporate profits is also feeding through to an upturn in private investment. Exports performed well in 2002 but have recently faced a more testing time as economic activity softens in other parts of Asia. Overall, GDP is forecast to accelerate gently from 0.1% last year to 1.0% in calendar years 2003 and 2004, rising to 1.2% in 2005.'
Ghosh adds: 'Improving global demand for consumer and capital goods will mean rapidly improving business for corporate Japan. With its manufacturing base increasingly re-locating to China, the subsequent lowering of operating costs should make Japan more competitive within the region.'
Global demand is rising.
Firms relocating to China are competitive.
Paul Bruns and Elaine Parkes
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From 3 to 10 October