(Bloomberg) -- Activist investors’ infatuation with Japan has reached record levels. So has their influence.
The funds have bought at least ¥1 trillion ($6.6 billion) worth of Japanese stocks this year, according to data compiled by Bloomberg Intelligence. Even after taking into account the deals they exited, their net buying is likely to be more than ¥500 billion, according to Bloomberg’s analysis of the data.
That makes them the largest purchasers of the country’s equities after companies doing stock buybacks.
Led by foreign funds including Elliott Investment Management and Oasis Management Co., as well as Japan-specific investors such as Yoshiaki Murakami, activists have taken stakes in at least 146 companies. They have successfully demanded disposal of real estate, changes in strategy and stock buybacks. In contrast, Japan’s lenders, insurers, trust banks and retail investors have all been net sellers this year.
“They are playing a positive role in changing corporate managements’ mindset from ‘No. we don’t have any problems’ to ‘yes, there are challenges’,” said Kazuhiro Toyoda, head of Japanese equities at Schroder Investment Management. The impact from activists on companies’ share prices plays a factor in his own investment decisions, he said.
The investment figures compiled by Bloomberg only include the stakes which the activists have publicly disclosed, meaning the real scale of their activities is almost certainly higher.
Foreign investors as a whole have bought only a net ¥400 billion of cash Japanese equities so far this year, separate data from the Tokyo Stock Exchange show. The TSE data is more granular than Bloomberg’s activist data, meaning the two sets are not fully comparable. Japanese institutional investors have been net sellers as they unwind cross-holding shares while individual investors have maintained their staunchly contrarian stance, selling into any market rallies.
Elliott, the world’s largest activist fund, notably stepped up its presence in Japan with four new investments, including a $2 billion bet on SoftBank Group Corp. In contrast, it only made three investments during the four-year period from 2020 to 2023.
Oasis, based in Hong Kong, opened a record 12 new public campaigns while a group of funds with ties to Yoshiaki Murakami were also active. Another home-grown activist, Strategic Capital Inc., also made five new investments.
(Note: Investment value is partly based on estimates)
Activist investors are now estimated to hold at least ¥4.8 trillion of Japanese stocks, about 0.5% of the total market value of about ¥980 trillion, according to data compiled by Bloomberg Intelligence.
The biggest single activist investor is Effissimo Capital Management Pte, which has large stakes in shipping firm Kawasaki Kisen Kaisha Ltd., the insurer Dai-ichi Life Holdings Inc. and copy machine maker Ricoh Co.
UK-based Silchester holds stakes in more than 30 Japanese companies including construction company Taisei Corp. and machinery maker Sumitomo Heavy Industries Ltd.
Most market players expect shareholder activism to be as frenetic, if not more, next year. This is in part because of pressure from Japan’s Financial Services Agency for companies to end cross-shareholdings, a decades-old practice that provided reliable support for management to fend off outside investors.
“Given the focus on improving capital efficiency, we are likely to see an increase in activists,” wrote Morgan Stanley analysts including Sho Nakazawa.
--With assistance from Yasufumi Saito.
©2024 Bloomberg L.P.