Oxstones Investment Club™by Atsuko Fusake, WSJ,
TOKYO—China’s government-wealth investors last year more than doubled their investments in major Japanese blue-chip companies, with combined stakes totaling more than 1.6 trillion yen ($19.4 billion), according to investment-advisory firms and people familiar with the matter.
The stakes—purchased mostly through obscurely named, Australian-registered investment vehicles—appear to be passive, with investors silent on matters of corporate strategy and management. But they highlight China’s growing financial clout as well as the growing economic ties between China and Japan. The moves also come at a time when China’s economy has just eclipsed Japan’s as the world’s second-biggest after the U.S.
Between April and September, a shareholder by the name of SSBT OD05 Omnibus Account Treaty Clients appeared on the top 10 shareholder registry of major Japanese companies including Toshiba Corp., Shiseido Co., Kirin Holdings, Tokyo Electric Power Co. The shareholder hadn’t been among the top 10 six months earlier.
Other companies show a similarly named fund as a shareholder: Sony Corp. (NYSE: SNE – News)and top Japanese banks Mitsubishi UFJ Financial Group Inc., Mizuho Financial Group Inc. (NYSE: MFG – News) and Sumitomo Mitsui Financial Group Inc. (NYSE: SMFG – News)
Since the stakes fall below the 5% level that requires greater disclosure under Japanese securities laws, the companies know little about the investors, which use vehicles registered at State Street Bank & Trust in Sydney, a unit of U.S. based State Street Corp.
But sovereign-wealth fund China Investment Corp., known as CIC, is one presence behind SSBT OD05, people familiar with the matter said. The State Administration of Foreign Exchange, or SAFE, which manages China’s more than $2.85 trillion in foreign-currency reserves, also is one of the parties likely behind SSBT OD05, according to Japan Shareholder Services, a joint venture between Mitsubishi UFJ Trust & Banking Corp. and Australia’s Computershare Ltd. that focuses on shareholder identification and proxy solicitation.
CIC and SAFE declined to comment. State Street also declined to comment on its individual customers.
Most of the Japanese companies interviewed said they viewed the small Chinese stakes as routine investments. But some have hired shareholder identification companies such as JSS to dig up more information.
It isn’t surprising that CIC and SAFE would be investing in Japanese stocks, given their size and the importance of the Japanese market. But the information provides a rare glimpse at the overseas investment portfolio of the Chinese state investors.
CIC was set up in 2007 to invest a portion of China’s currency reserves more aggressively than SAFE, which traditionally parked the money in Treasurys and other sovereign debt. The two are widely seen as rivals. SAFE has never disclosed its specific holdings or even how much of its assets are invested in equities, though the percentage is believed to be small.
CIC, which had total assets of $332 billion at the end of 2009, in February last year reported stakes totaling $9.6 billion in more than 60 U.S.-listed stocks and funds, a figure that excluded some of its publicly announced investments in the U.S. The figure marked the first time CIC disclosed details of its holdings of U.S. stocks and funds.
According to a recent report compiled by Japanese investment adviser Chibagin Asset Management from companies’ shareholder records, Chinese state funds more than doubled their investments over the six months ending Sept. 30, to an estimated 1.62 trillion yen in 90 companies from 624 billion yen in 35 companies as of March. The figures don’t include investments from other Chinese investors.
A shareholder registered with a similar name at the same Sydney address, SSBT OD05 Omnibus China Treaty 808150, first appeared as the eighth-biggest shareholder in Sony’s securities report of the fiscal year ended March 2008 and increasingly invested in major firms.
Sony said SSBT OD05, which holds a 1.6% stake in the consumer-electronics maker, is registered in Sydney and that an arm of HSBC Holdings PLC (NYSE: HBC – News) is its standing proxy agent. But “in terms of investors or actual shareholders, we don’t understand who they are,” a spokesman for Sony said.
“We realize that [SSBT] is likely Chinese SWFs, but we’re not particularly paying attention to one specific shareholder,” said a spokesman for chemical-products maker Nitto Denko Corp., referring to sovereign-wealth funds. SSBT OD05 Omnibus Account Treaty Clients was a top 10 shareholder in Nitto Denko as of September.
JSS has received an increasing number of inquiries from its clients about SSBT. Tatsuya Imade, JSS’s managing executive officer, said his firm last year formed a team to study the unfamiliar shareholders behind the SSBT OD05 Omnibus Treaty. Mr. Imade said investments by the SSBT OD05 account aren’t strategic investments but diversified portfolio investments.
Tags: Asia, caj, canon, china investment corp, china investments, China sovereign wealth funds, CIC, government investments, japan stock market, japanese blue chip stocks, MFG, ntt, SAFE, SMFG, SNE, softbank, sony, state administration of foreign exchange, takeda pharma