TOKYO -- Overseas shareholders' presence on Japan's stock market dipped in the year ended March 31 amid strong headwinds endured by exporters, ending three years of increases.
Foreign investors held 29.8% of Japanese stocks by value at the fiscal year-end, a drop of 1.9 percentage points from a year earlier. Those holdings totaled 154 trillion yen ($1.47 trillion), down 28 trillion yen. Traders abroad sold around 5 trillion yen more in shares than they purchased on the market during the fiscal year.
Many Japanese stocks are exporters, and the market at large is sensitive to changes in the world economy, Ryoma Sugihara of Societe Generale said. Unloading the stocks thus "became more commonplace" amid dimming outlooks for China's economy and uncertainty surrounding the timing of U.S. interest rate hikes, he said. This translated to a 13% decline in the Nikkei Stock Average in fiscal 2015.
The departure of foreign traders hit resource-linked stocks particularly hard. Overseas investors' stake in engineering company JGC tumbled 7.9 percentage points as sliding oil prices cut demand for resource development projects, halving the value of orders in fiscal 2015.
Trading houses felt a similar crunch, with foreign shareholding in Mitsui & Co. dropping 7.7 points. Impairment losses stemming from a sluggish commodities market handed the company its first-ever net loss in fiscal 2015. Mitsui also has indicated dividend cuts could be in store this fiscal year. "Overseas investors previously pleased with high dividends have begun to sell in reaction to uncertainty" on that front, an analyst in Japan said.
Electronic components makers also have been trampled in the exodus of foreign capital. Minebea's overseas ownership dropped 9.4 points as the company faced sluggish sales of light-emitting diode backlights for smartphone screens amid duller demand for Apple products.
Even some companies supported by domestic demand, which reduces exposure to currency market shifts, did not emerge unscathed. Overseas investors' stake in Sumitomo Realty & Development sank 4.6 points. The company leans more heavily on condominium operations than its peers, leading to especially heavy selling as surging property prices in the Tokyo area dented condo sales.
However, "investment has picked up in domestic-demand stocks with strong earnings," said Mitsushige Akino of Ichiyoshi Asset Management. Foreign shareholding increased for members of that group such as beauty products maker Kose and snack maker Ezaki Glico.
Other buyers step up
Shareholding by city and regional banks remained at 3.7% of the total, though efforts by Japan's megabanks and others to unwind cross-shareholdings cut the value of that stake by 1.95 trillion yen to 19 trillion yen. Mitsubishi UFJ Financial Group's holdings fell 750.1 billion yen to 5.57 trillion yen.
"Changes in other investors' behavior," including the dip in foreign shareholding, "kept banks' percentage of the total constant," Naoki Ieiri of Daiwa Securities said.
Trust banks and corporations, meanwhile, upped their presence on the market. The former's rise reflects factors such as the Bank of Japan's purchase of exchange-traded funds, while the latter's likely stems from a preponderance of share buybacks.