JAPAN - Offshore and foreign institutional investors have become more important to Japanese equity brokers because of their trading behaviour and increased activity in the Japanese equity market.
These observations are based on the results of Greenwich Associates’ 2005 Japanese Equity Investor Research Study, which found that offshore investors and foreign subsidiaries appear to be increasing their activity in the Japanese equity market much faster than domestic institutions.
Greenwich Associates consultant John Webster explained: “Offshore hedge funds are accounting for a growing proportion of the equity trading business in Japan, and traditional long-only institutions and foreign subsidiaries appear to have ‘found religion’ about the Japanese economy to a much greater degree than domestic investors.”
Between 2003 and 2005, the research found that Japanese equity holdings of domestic institutions grew by nearly 50%, but the Japanese equity portfolios of foreign investors expanded by nearly 105%.
Meanwhile, equity commission payments from domestic institutions rose by 44% over the period, while non-domestic commissions neared 200%. Greenwich Associates consultant Tomio Sumiyoshi commented: “A great many foreign and offshore institutions have come to believe that the Japanese economy is on the way to sustained recovery, and as a result, more non-Japanese institutions are becoming active in the market, and those that are invested in Japanese equities are investing more.”
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