Foreigners Biggest Stock Sellers in 21 Years, Tokyo Bourse Says

By Satoshi Kawano

Jan. 14 (Bloomberg) -- Foreign investors were bigger net sellers of Japanese stocks in 2008 than in any other year in the last two decades, and the trend may continue in 2009, as the earnings outlook for many companies remains bleak.

Non-residents were net sellers of 3.7 trillion yen ($42 billion) in Japanese equities last year, the Tokyo bourse said today, based on data from exchanges in Tokyo, Osaka, and Nagoya. It was the biggest net outflow by foreign investors since 1987, the data compiled by the Tokyo Stock Exchange showed.

“It’s too early to say that sales by overseas funds that previously expanded through borrowing peaked last year,” said Gentoku Kiyokawa, director of Fortis Investments in Tokyo, which oversees $200 billion in assets globally.

The investment figures highlighted the combined effects of tighter liquidity, which forced some foreign funds to sell holdings, and deepening concern about the global financial crisis, which has thrust the Group of Three economies into simultaneous recessions for the first time since World War II.

Funds from overseas investors “aren’t likely to flow into Japanese equities this year unless there are signs of a halt in the deterioration of earnings at Toyota Motor Corp., Canon Inc., and other global blue chips,” Kiyokawa added.

Non-residents were last net sellers in 2000, and their biggest selling position was in 1987, when they liquidated 7.2 trillion yen in shares, according to the TSE data.

Domestic individuals became net buyers for the first time since 1990, acquiring more than 1 trillion yen in shares.

Trust Banks

The purchases by locals are a sign that “low global interest rates and a strong yen made foreign currency- denominated assets look less attractive” to individuals, said Takahiro Tsuchiya, a strategist at Daiwa Institute of Research in Tokyo.

Retail investors may take advantage of a low Nikkei 225 Stock Average, which fell a record 42 percent last year, to continue buying, Tsuchiya said.

Trust banks, which manage pension funds, bought a net 4.5 trillion yen in equity, the most since 1998, as funds rebalanced their portfolios in the wake of global declines in stock markets.

“Many corporate pension funds may reduce their weighting of Japanese shares this year,” said Mitsushige Akino, an investment officer who oversees about $430 million at Tokyo- based Ichiyoshi Investment Management Co.

The Government Pension Investment Fund, which manages more than 1 trillion yen, may be a net seller this year, Akino said.

To contact the reporter on this story: Satoshi Kawano in Tokyo at skawano1@bloomberg.net