Foreign investors leaving Japan

Foreign investors, a key driving force in Japan's stock markets for the past several years, are pulling out in droves as the global financial crisis bites, leaving share prices in the doldrums.

Sales by overseas investors are expected to exceed purchases in 2008 for the first time in eight years, according to figures released by the nation's three largest exchanges.

Net sales by foreigners from January to the third week of December (Dec. 15-19) totaled 3.6 trillion yen on the Tokyo, Osaka and Nagoya stock exchanges.

Until recently, trading by foreigners accounted for 60 percent of the total in value.

Overseas investors accounted for 53.2 percent in the third week of this month, with sales exceeding purchases for the third consecutive week.

Encouraged by former Prime Minister Junichiro Koizumi's reforms, foreign investors have been active on Japanese bourses since 2001, pushing up the Nikkei 225 average from 2003 to 2007.

Foreigners began to forsake markets here in earnest when the U.S. subprime mortgage crisis worsened in late 2007, triggering worldwide financial instability.

Overseas traders were net sellers in the first three months of this year. But later, purchases sometimes outpaced sales when stock prices rose.

After leading U.S. brokerage Lehman Brothers collapsed in September, however, foreign sell orders inundated the market, overwhelming buyers.

U.S. and European financial institutions and investment funds, badly burned by global financial woes and facing difficulty raising money, have retrenched, pulling their funds back home.

Meanwhile, individual investors are expected to emerge as net buyers this year in part because they view some shares as undervalued.

Their net purchases until the third week of December came to 1.1 trillion yen.

Trust banks, which manage stock investments by pension funds, and businesses buying back their own stocks will also likely be net buyers.

But buy orders by individuals or for pension funds and stock buybacks will "not likely give impetus" to a share price rally, a major brokerage official said.

More foreign companies are packing up and going home as well, slashing the number of foreign businesses listed on the Tokyo Stock Exchange by nine to 16 this year.

This is a far cry from the 127 firms listed in 1991, when Japan's asset-inflated bubble economy was set to burst.

Foreign financial institutions operating in Japan are also slimming down fast.

Of their 28,000 employees, 3,100 lost jobs as a result of restructuring by mid-December, and 1,300 more are expected to leave by mid-2009.(IHT/Asahi: December 29,2008)