Buy Japanese Environment Stocks, Credit Suisse Says
By Makiko Suzuki
April 12 (Bloomberg) -- Investors should buy shares of Japanese environment-related companies such as Toshiba Corp. and NGK Insulators Ltd., Credit Suisse Group said on the view they will benefit from expanding business opportunities.
``Global warming is becoming an increasingly serious concern for all. It is a threat, and it will be costly. Yet it also provides significant business opportunities,'' Shinichi Ichikawa, chief strategist at Credit Suisse in Tokyo wrote in a note dated yesterday. ``We are keeping an especially close eye on firms active in nuclear power, water treatment, new energy development, automaking and emission rights trading.''
Credit Suisse recommended buying 14 stocks including Toshiba, Japan's biggest supplier of nuclear power reactors by capacity, NGK, a maker of exhaust-gas filters, and Toyota Motor Corp., the maker of the world's best-selling gasoline-electric hybrid cars.
Stocks related to nuclear power are particularly attractive because it's the key solution to economic growth and greenhouse gas suppression, said Ichikawa, 43.
The strategist also said Japanese companies will benefit from rising demand for their products and services in China, as the country's government is inclined to solve environmental problems in the region.
Only Viable Alternative?
``We plan to recommend that global investors buy Japanese environment-related stocks for at least another one to two years,'' Kyoya Okazawa, managing director at Credit Suisse's equity research division in Tokyo, said in a phone interview. ``There are few companies that can provide the necessary products and services, and Japanese players are undervalued compared with their overseas rivals.''
Nuclear power is the only ``viable'' alternative energy source that can replace crude oil and meet conditions of price, stability and safety, said Ichikawa, a graduate of Meiji University who ranked tenth among Japan equity strategists in Institutional Investor's 2005 survey.
All the other so-called new energy sources, such as wind and solar power, will only play only a supplementary role for at least the next two decades, he wrote.
More than 100 new nuclear power reactors are scheduled for construction in the world by 2020, while Japan is the only nation which has continued to build such facilities since the late 1980s, according to Credit Suisse.
China's Shift
Mitsubishi Heavy Industries Ltd., the builder of Japan's first nuclear station, surged 11 percent in the two days ended March 15 after the company won a $5.1 billion order to build two reactors for TXU Corp. in Texas.
Toshiba expects sales in its nuclear construction, maintenance and fuel businesses to more than triple in 2015, helped by its purchase of Westinghouse Electric Co.
Hitachi Ltd., a Japanese builder of nuclear power plant equipment, is considering setting up production in Russia as the two countries look for ways to cooperate on atomic energy.
Japan's Prime Minister Shinzo Abe and Chinese Premier Wen Jiabao signed an agreement yesterday to fight global warming during Wen's first trip to Tokyo as premier.
Japan's Trade Minister Akira Amari and Ma Kai, director of China's National Development and Reform Commission, signed a communique highlighting energy saving by the two countries and the development of clean coal technology on the same day. The accord also included Japan's continuing efforts to help China operate and build nuclear power plants safely.
Emission Credit
Ichikawa also recommends that investors buy companies with technology to increase the efficiency of existing power plants and reduce greenhouse gas emissions because they will also benefit from a shift in environmental policy by China which is not obliged to cut its emissions under the 1997 United Nations Kyoto Protocol on climate change.
Yesterday China committed to participate in negotiations to reduce greenhouse gas emissions from 2013, after the Kyoto Protocol expires.
Mitsubishi Corp. and Nippon Steel Corp. received an authorization by the United Nations to receive gas emission credits from their projects in China, the Nikkei newspaper reported.
Mitsubishi, which will get credits equivalent to annual carbon dioxide emissions of 350,000 metric tons for as long as 21 years, will sell the credits to Japanese companies, the paper said.
Business opportunities for such companies will increase globally, helped by the Kyoto Protocol which allows emissions trading and encourages industrial nations to help emerging countries cut gas emission, Ichikawa said.
At the start of this year, Ichikawa said investors should buy Toyota and East Japan Railway Co., Japan's largest train operator, on prospects the global economic growth will boost corporate earnings.
The following is the list of 14 recommended stocks:
Chiyoda Corp. (6366 JT)
Honda Motor Co. (7267 JT)
Ishikawajima-Harima Heavy Industries Co. (7013 JT)
Isuzu Motor Corp. (7202 JT)
JGC Corp. (1963 JT)
Kyocera Corp. (6971 JT)
Mitsubishi Corp. (8058 JT)
NGK Insulators Ltd. (5333 JT)
Sharp Corp. (6753 JT)
Sumitomo Corp. (8053 JT)
Suzuki Motor Corp. (7269 JT)
Toshiba Corp. (6502 JT)
Toyota Motor Corp. (7203 JT)
UBE Industries Co. (4208 JT)
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