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Stocks

Activist investor Murakami returns to Japanese stocks with familiar hostility

TOKYO -- As Tokyo shares continue to regain vigor, a spotlight is on the comeback of Yoshiaki Murakami, one of Japan's first domestic activist investors who later was convicted of insider trading.

     While the Nikkei Stock Average rose further Monday afternoon following an upturn in Chinese shares, Kuroda Electric was having an extraordinary session, shooting up 9% after announcing Friday that it would hike its dividend considerably.

     The semiconductor trading house says the payout increase did not come "in response to a particular shareholder," in the words of a management planning official. But such statements are not entirely convincing because the company has been the target of demands by C&I Holdings, an investment company effectively controlled by Murakami. C&I, which owns more than 14% of Kuroda, demanded in late June that the company return 100% of its profit to shareholders and appoint four external individuals to the board, including Murakami himself.

     Kuroda's latest profit-returning plans "are merely a stopgap measure," Aya Murakami, C&I CEO and daughter of the infamous activist shareholder, said Monday in a statement.

     Kuroda is attacking Murakami's demands. Excessive shareholder returns would undermine corporate financial health, it argues. The company also criticizes the acquisitions and industry realignment that C&I wants, saying that ill-considered expansion would hurt its enterprise value. Murakami's outside director proposal will be put to a vote at an extraordinary shareholders meeting in late August.

     Murakami has other targets. A shareholdings report Monday showed he now owns over 5% of Excel, another semiconductor trading company.

Market return

     Why is Murakami returning to the Japanese equities market now? In 2011, he was found guilty of insider trading in Nippon Broadcasting System shares and given a two-year prison term with a three-year stay of execution. With the suspended sentence wrapping up in June 2014, he apparently has bolstered his investing.

     Murakami, who remains based in Singapore, made it big in real estate in Asia, and has a plenty to spend –- with an estimated tens of billions of yen invested in Japanese shares. Because the fund does not manage other parties' money, it can "afford to continue holding shares until our demands are met," says Aya Murakami.

     According to a source close to Murakami, he has returned to the market of the belief that the government's corporate governance code, adopted in June, will change Japan. "The time has come when investors can make investments, even hostile ones, freely," he is said to have commented.

     Indeed, shareholder-focused management has gained general acceptance in Japan, and this may mean that the environment that Murakami sought to realize as an activist shareholder back in the 2000s is finally here. But the mainstream approach today is friendly communication, where investors seek to use constructive exchanges with a company to enhance its enterprise value. Accordingly, Murakami, known for his hostile activism, is unlikely to win supporters for now.

     Still, it is true that many stocks are left undervalued because of inefficient management. Murakami may continue to invest in this market until these companies completely disappear from the scene.

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