April 22, 2017 4:15 am JST

Market Scramble: Iranian fund sets sights on Japan stocks

Tech, market liquidity appeal to emerging-economy government funds

SHINYA OSHINO, Nikkei staff writer

Iran is ready to invest in Japanese stocks as the pain of economic sanctions eases.

TOKYO -- With the grip of Western sanctions easing, Iran is ready to ramp up economic activities overseas, including investment in the Japanese stock market. 

The state-owned Iran Foreign Investment Co. is armed with assets of some $5 billion. The fund has targeted mainly the financial and resource sectors in Europe, the Middle East and Africa but is now looking at Japan, according to Director of Investment Vahid Sharif.

The sudden interest in Japanese stocks is not just because of their promise for investment returns. The potential of unique Japanese technologies is appealing to Iran, which is in dire need of revitalizing industry. Internet connectivity in Iran is poor, hurt by years of economic sanctions from the West, and air pollution is severe. The nation is wasting energy, Sharif said.

Japanese health care stocks are also seen as promising. Regardless of the uncertainty surrounding U.S. President Donald Trump's Middle Eastern policies, Japan and Iran have built long-standing good relations through crude oil trade and other avenues, Sharif said. IFIC is already in talks with major securities brokerages here and will soon decide on investment targets.

Attention from Asia, Europe

The growing interest in Japanese equities is not limited to Iran. Soichiro Monji of Daiwa SB Investments felt it from Southeast Asian government funds when he visited their officials in early March. "They are looking for opportunities to invest," he said.

A source at a foreign-affiliated asset management company also noted that European government funds have raised their weightings of Japanese equities since February and that inquiries have recently been coming in from Asia.

Government funds' assets under management are growing worldwide. Such assets doubled from 2009 to $6.59 trillion as of March, according to research company Preqin. For 2017, stocks in listed companies are to account for 79% of their asset portfolios, surpassing investment in real estate and infrastructure.

Low interest rates worldwide are driving many government funds to put assets into equities. "The highly liquid Japanese market is convenient for government funds, which invest at a certain scale," said Chihiro Ota of SMBC Nikko Securities.

Stocks with large market capitalizations, such as Topix Core30 index components, are largely favored. Fanuc has risen 12.97% since the end of 2016, against the 2.58% drop by the Nikkei Stock Average. Keyence has gained 8.78%, and Shin-Etsu Chemical 3.23%.

Government funds' assets are expected to continue increasing, mainly in emerging countries. South Korea, Vietnam, Brazil and Turkey are among those that have set up such funds. Sovereign funds, with their long-term investment horizons, provide valuable support for the directionless Japanese stock market.

FANUC Corp.

Japan

Market(Ticker): TKS(6954)
Sector:
Industry:
Producer Manufacturing
Industrial Machinery
Market cap(USD): 41,460.57M
Shares: 204.07M

KEYENCE Corp.

Japan

Market(Ticker): TKS(6861)
Sector:
Industry:
Electronic Technology
Electronic Equipment/Instruments
Market cap(USD): 48,855.28M
Shares: 121.60M

Shin-Etsu Chemical Co., Ltd.

Japan

Market(Ticker): TKS(4063)
Sector:
Industry:
Process Industries
Chemicals: Specialty
Market cap(USD): 37,525.97M
Shares: 432.10M

Get Insights on Asia In Your Inbox

To read the full story, Subscribe or Log in

Get your first month for $0.99

Redeemable only through the Subscribe button below

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.

To read the full story, Subscribe or Log in

Once subscribed, you can…

  • Read all stories with unlimited access (5 articles per month without subscription)
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.