TOKYO : Japan's equity offerings have surged more than quadrupled this year, with investors encouraged by a 33-year high in the Nikkei stock index and signs that Japanese firms have begun to manage their capital more efficiently.
A tough 2022 for equity capital markets globally resulted in a backlog of funding deals. Japan has also benefitted from far lower interest rates than other nations, including billionaire Warren Buffett's lifting of positions in Japanese firms and a re-allocating funds away from China despite tensions between Beijing and Washington.
Proceeds from initial public offering and secondary share and convertible bond issues soared 343 per cent to $23.7 billion in the first nine months of the year, according to LSEG data. The number of deals fell by a third in the first three quarters of this year.
equivalent data for China shows a 29 per cent decrease in proceeds, though to a much bigger $104.3 billion, on an 11 per cent drop in deals.
In the nine months, there were 73 Japan IPOs that raised a combined $3.3 billion, nearly four times as much as the same period a year earlier. The deal also included a $625 million offer from Rakuten Bank.
The chip tool maker Kokusai Electric's 111 billion yen offering - currently in train for an Oct. 25 listing - is set to be Japan's largest IPO in more than five years.
Successful Listings both in Japan and elsewhere could encourage more IPOs, said Yusuke Minowa, head of equity capital markets at Goldman Sachs Japan.
Other notable offerings included Toyota's sale of about 25 billion yen worth of shares in KDDI, or about 20 percent of its holding in the telecoms company, a Bankers said, of an acceleration in the unwinding of Japan Inc's cross-shareholdings.
Bankers note that investors have been especially enthused by the Tokyo Stock Exchange's call in March for companies to disclose plans to improve capital efficiency, especially if their shares are trading below book value.
That has led to a wave of share buybacks and dividend hikes and helped the Nikkei climb by about a quarter for the year to date compared to an 11 percent increase for the S&P 500.
Goldman Sachs' Minowa said institutions have been rebuilding their Japan positions since April.
While Japan's funds are still around 20 percent underweight compared to benchmarks, momentum for Tokyo's equity capital markets is likely to remain robust.