TOKYO -- Concerns about a global economic slowdown continue to deter investors from making big stock purchases here, but some have begun betting on companies pursuing growth through capital investment and acquisitions.
Stock prices for automakers and electronics companies dropped across the board here Friday in response to a strong yen. Mazda Motor, which is easily affected by a strong currency, fell nearly 4%, while Hitachi dipped over 3%.
Cosmetics maker Shiseido decided Feb. 3 to build a new domestic plant to meet growing demand for Japanese products in Asia. Seasonings giant Ajinomoto announced Feb. 8 that it will launch a joint venture producing a type of amino acid.
Even shares in smaller businesses, as long as they are pursuing new demand and making investments, are being snapped up. W-Scope, which makes battery parts for Chinese electric cars, projects a record operating profit for 2016 and said Feb. 12 that it will bolster output. The issue surged 4.5% Friday, gaining for the fourth session in a row, and is nearing an all-time high.
Corporations are expected to use the roughly 100 trillion yen ($889 billion) that they hold effectively, but investors seem divided on what that means. Companies with more cash on hand had gained favor amid the turmoil since the beginning of the year, but market players now are refocusing on how the funds are being spent.
"About 10% of investors are choosing growth issues," said Mitsushige Akino of Ichiyoshi Asset Management.
Acquisitions are another constructive use of funds. Japanese corporations spent almost twice as much on buying foreign businesses in 2015 than the year before, Tokyo-based consultancy Recof said. Stock prices tend to be high the year after a rush in acquisitions, except in 2008 after the financial crisis and in other rare circumstances.
Companies that have announced acquisition plans are gaining. Daikin Industries, a giant in commercial air conditioning, is buying a U.S. air filter maker. The issue fell Feb. 9 when the news broke due to concerns about the deal's impact on Daikin's finances. But the forward-looking global strategy led it to a recent high Thursday.
The market remains extremely risk averse, and only some are actually buying growth stocks. "We still need to see what happens in mid-March and beyond, after the Japanese, U.S. and European central banks hold their policy meetings," said Naoki Fujiwara of Shinkin Asset Management.
But a wide range of stocks are being oversold in Tokyo. The tide could change quickly, so it would be prudent to keep an eye on companies pursuing growth.