カテゴリー: Message from Tokyo

Today is a national holiday, Marine Day, in Japan.  Marine Day （third Monday of July）: day for giving thanks for the many blessings Japan receives from the ocean as a country completely surrounded by water and also for reaffirming the people’s desire to prosper as a maritime country （designated as a day to remember the ocean in 1941; became a national holiday in 1996）.  A odd holiday, but it is a good day-off to ponder the European crisis. A shrewd trader can make the most of this uncertain period.

TOPICS OF THE WEEK

To promote money and business flow between Japan and Malaysia is always the task No.1 to me, the head of Subsidiar of an Malaysian entity. 

One way is to raise a shariah compliant private-equity in Japan. This will help Japan to promote new buinsess after the Great Quake, while it will create a new investment class to Malaysian and GCC investors particularly who were limited to make investment only shariah compliant targets.

Another way is to launch a Malaysian fund to Japanese institutional and retail investors. Malaysia, together with Indonesia,  is the country which enjoys the longest population bonus among ASEAN countires. The country is rich in natural resources and is suppling industrial products to developed countries. The country looks most stable in APAC nations.

Please be informed that PNB keeps the best position to promote money and business flows between Malaysia and Japan.

MARKETS

                     July 13      1 week%Change

    NIKKEI      8724.12    -3.28

    TOPIX         746.34    -3.30

Weak corporate earnings in the U.S. and no visible results from the Euro Finance Ministers’ meeting were the main reasons of more than 3% reduction for the last week. This week will be another directionless week. The market will keep weak sentiments as QE3 and BOJ are not expected in imminent future.

ECONOMY

Generally speaking, sentiment is better on Japanese economy. People may spend more during summer holidays. The year’s recruitment of newly grads from universities will be improved, according to Nikkei Newspaper.

Although China slowdown may be the risk factor, Japanese economic performance must be better than other developed economies.

Comparing to Taiwan and Korea, Japan will less vulnerable to the European and American recessionary situation.

POLITICS

Now, the ruling DPJ was split because a group led by Mr. Ozawa said SAYONARA to PM Noda. Ozawa decides his party name, Kokumin no kurashiga ichiban. It literally means “People’s Livelihoods First,” which is regarded as joke by many Japanese voters.

Political situation becomes very fluid. Japan does not have time to waste in playing musical chairs. Only solution will be a general election to decide undecided issues.

 See you next week!

I am currently in KL, Malaysia on business trip. One thing I was impressed by was the improved passport control at the KL International Airport. You do not have to fill the immigration from. Entry to Malaysia is completely paper free. The lines at the passport control were much shorter than before. Good Job Malaysia!

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TOPICS OF THE WEEK

Japanese investors start to know the distribution they get from mutual funds are largely from principal not from performance of the investment.

Japanese individuals have invested more than Yen 30 trillion (about RM 1.1 trillion) into High-Yield-Monthly-Dividend type mutual funds facing very very very low interest rate in Japan. Many of those funds, however, have been distributing more than the actual fund performance to attract retail investors who do not know the gimmick of the HIGH PERFORMANCE they get.

FSA Japan has started giving guidance to Asset Management companies and Brokers to disclose how much distribution are made from actual performance and how much are from principal. The results are alarming. Some funds ,which have provided high dividend by reducing principal, are facing NAV reduction because investors are selling such funds. 

Here are some exampes of funds which have high distribution from principal.

Name of the fund                NAV(Yen Bn)   Distribution from Principle     

Global Sovereign Open      1589                80%                                       

Daiwa US REIT                   576                 50%                                       

Global High Yield                 653                 50%                                       

MARKETS

                     July 6        %Change

    NIKKEI      9020.75  +0.15

    TOPIX         771.83   +0.22

This week will be another directionless week. A week of Waiting for some better news on European crisis and U.S. economy, and Expecting a lot to the BOJ policy meeting middle of the week. Hard to tell what will happen, but it may be OK to say the Nikkei will be around 9000 yen.

ECONOMY

Generally speaking, sentiment is better on Japanese economy, thanks to better economic statistics comparing to Europe and the U.S.

Although China slowdown may be the risk factor, Japanese economic performance must be better than other developed economies.

POLITICS

Now, the ruling DPJ was split because a group led by Mr. Ozawa said SAYONARA to PM Noda. Political situation becomes much more fluid. Japan does not have time to waste in playing musical chairs. Only solution will be a general election to decide undecided issues. ]

See you next week!

Inspired by Peter Drucker’s “Adventures of A Bystander,” this memo is written to myself to reflect the current situations in Japan.

TOPICS OF THE WEEK

    In the professional wrestling world, there are two types of wrestlers, a heel and a babyface.

    Heel is always a bad guy, and is not liked by people.

    Babyface is a good guy, who is simple and straight, and liked by people.

    It looks like Germany has two skilful wrestlers. Angela Merkel is a heel, and Wolfgang Schauble is a babyface.

    The people watching the Euro-match should pay attention to who comes in front next time.

    Don’t overenjoy while Schauble is playing nicely to the opponents. The devil,still, may be in the details which we don’t know!

MARKETS

                     June 29    %Change

    NIKKEI    9006.78   +2.36

    TOPIX      770.08    +2.55

    The result of EU summit turned the sentiment of the market very positive. The Japanese recovery-related-stocks, such as construction and cement companies contributed to the recent hike. NIKKEI recovered 9000 level.

    Some say NIKKEI will reach 10,000 level, which I am doubtful. August is a month of anomaly, usually weaker than July. Without confirming the recovery of U.S. economy, I would believe July raly may be a good opportunity to realize the profit.

POLITICS

    The ruling DPJ will be split. The group of 50 people led by Mr. Ozawa, a shadow shogun, has announced departure from DPJ as early as within this week.

    Political scene of Japan is very fluid again. This political risk is the largest risk factor to the stock markets. I think the most likely scenario is Noda is going to make alliance with LDP to form a new government after a general election.

ECONOMICS

    The possible hike of Sales Tax will push comsumption of expensive items, and will have positive stimulus to the economy before summer of 2014 when 3% increase will be effective. Reliability to JGB will also inceased, and low coupon rate on JGB will continue for a while. 

NUCLEAR ACCIDENT & EARTH QUAKE

   The radiation level of Tokyo is 0.048 sievert this morning. Same level as of  last week. The life in Tokyo is normal. 

Sorry to be one day delay. Things have been hectic recently. Markets also. This kind of market, however, is the time for fund managers to show their capability.

TOPICS of the WEEK: 　　“Islamic Finance News ROADSHOW 2012” was held on June 21, 2012. This is once a year forum on Islamic Finance in Tokyo organized by Islamic Finance News. There were about 50 participants from financial sectors. Many lawyers and accountants also joined the forum. 

Major topics of this year was  J-sukuk, sukuk issued in Tokyo in Yen. There was heated discussion how the J-Sukuk market will be feasible mainly from legal aspects. Both issuers and investors are hesitant to get into the market, I believe. Without massaging the hesitant, noting will happen. 

Issuers: There is not much necessity for Japanese companies to issue sukuk in Tokyo.There may be some necessity for project financing in Islamic countries.Corporate issuers will go to Samuai-bonds instead of J-sukuk. Samurai-bonds are easier and have acquired supports from Japanese investors.Investors: If the return is attractive, many institutional investors will join into the markets.Japanese trust banks, trustee for sukuk, is not ready in understanding the structure 

           Artificial efforts would not create new markets. Markets can exist only where “meeting of minds” can happen. 

        MARKET:

                               June 22           June 15             Change

               Nikkei      8798.35             8569.32             2.67% TOPIX     750.92               726.57               3.35% 

             The victory of relatively moderate parties at Greece and the stop of hiking Yen made the Japanese markets rise. What a short sighted markets participants are!  July will be the month of “Picking up Greece, and say the problems are handled OK.” and, “Citing possible QE3, and say the problems in the U.S. is under control.”                                                                            POLITICS:             Mr.Noda has acquired support to his comsumption tax hike from two opponents parties. It is, however, much harder for him to get support his own party. Mr. Ozawa, a shadow shogun, is openly saying that he will split DPJ by leading out 60 diet members with him.                           Political scene of Japan is very fluid again. This political risk is the largest risk factor to the stock markets.              I think the most likely scenario is Noda is going to split DPJ and makes alliance with LDP to form a new government.         ECONOMY:             General feeling of consumers are fine by getting into summer bonus season. 

         NUCLEAR ACCIDENT & EARTH QUAKE

              The radiation level of Tokyo is 0.048 sievert this morning. Same level as of  last week. The life in Tokyo is normal.

END             

 The market looks happy to know the result of the election in Greece.  I just would like to tell the same thing as Sir Winston Churchill did immediately after the British victory in North Africaq. “Now this is not the end. It is not even the beginning of the end, but it is, perhaps, the end of the beginning.”  

TOPICS of the WEEK: 

　　 I made a progressification two weeks ago, on May 28, 2012 about the definite future of Greece. Let me quote what I said.

 

        Quote:           Now, let’s think in Greece’s shoe. What is the optimal solution to them?       They have two sets of cards 1.    To accept austerity policy or Not to accept austerity policy2.    To stay in Euro or Not to stay in Euro         Greece should be skillful in handling those two cards. The order and timing of showing the cards to outside Greece is important. 

         The best story is to get as much financial support, and to default outside debts, and get out of Euro.         Greece needs financial support to pay existing debts. In order to get such support Greece promises to accept austerity policy. (This is just   done!)         Greece must negotiate to make the degree of austerity favorable to its people. (This will happen soon!)         Existing debt is more than Greece can pay, so Greece will default the debts, including the new money, by saying domestic situation is this and that.         In order to be internationally competitive, Greece should be out of Euro. This will make the Drachma a weak currency, and it will help to adjust balance of trade.         Having higher inflation would be accepted better to Greece people than austerity policy such as reducing salary to half. (This will happen before the end of 2012.)                  This is a definite future of Greece.

         Unquote:

 

       MARKET:                                June 15            June 8             ChangeNikkei      8569.32             8459.26             1.30% TOPIX     726.57               717.74               1.23% 

              The Japanese markets will start positive affected by the taking-a-breath at Euro-zone. The move after that is really hard to tell, as the markets around the world will soon recognize that the Euro-crisis is far from over.                                                                         POLITICS:             Mr.Noda has acquired support to his comsumption tax hike from two opponents parties. It is, however, much harder for him to get support his own party. Some are openly against the policy saying that is against the party’s manifest.                            Political scene of Japan is very fluid again. This political risk is the largest risk factor to the stock markets.              I think the most likely scenario is Noda is going to split DPJ and makes alliance with LDP to form a new government.         ECONOMY:             There are many mixed economic figures in the market.           NUCLEAR ACCIDENT & EARTH QUAKE

              The radiation level of Tokyo is 0.049 sievert this morning. Same level as of  last week. The life in Tokyo is normal.

END