Although 9984 closed down a little again in Tokyo at $1428 US equivalent, I think most of us are keeping things in perspective. Softbank is still up almost 50% so far this year in two months. There was an interesting comment on the Nikkei Net about the three member consortium that is buying the Nippon Credit Bank. I've seen some skeptical comments on whether it is wise for Softbank to invest in a bankrupt bank. I have to admit that I have some concerns (much like I have for the AOL Time Warner merger). I notice that none of the three companies that are buying the NCB are doing well in the market since they won the competition. Anyway here's the Nikkei Net article:
Wednesday, March 1, 2000
Stock In Focus: Tokio Marine & Fire Insurance
TOKYO (Nikkei)--The share price of Tokio Marine & Fire Insurance Co. (8751) has been dropping more or less steadily since last fall due to sluggish sales and the liberalization of insurance premiums.
On Feb. 15, the company share price hit 985 yen, dropping below 1,000 yen for the first time since January 1997. Since then, it has stayed in the lower 1,000 yen range.
A consortium consisting of Softbank Corp. (9984), Orix Corp. (8591) and Tokio Marine was chosen by the Financial Reconstruction Committee on Feb. 24 as the buyer of Nippon Credit Bank. But that has not led to active buying of Tokio Marine's stock, because "the bank's clientele will not directly lead to expanded sales, and the whole business plan is very vague," says Ryuji Kakimoto, a senior analyst at Daiwa Institute of Research.
Nonlife stocks with plenty of unrealized portfolio profit have traditionally been linked to the fluctuations of the Nikkei Stock Average. But "that correlation has been lost since October 1998," says Mitsumasa Okamoto of Merrill Lynch Japan Inc.
Another analysts adds, "The bank has lost its appeal as a healthy financial institution since it recovered from the injection of public funds."
Tokio Marine's share price can be expected to recover to a certain degree, considering the firm's competitive edge within the industry and the perception of its shares as undervalued, as shown by the price-book value ratio adjusted to include the paper gains of its stock portfolio.
But many analysts agree with Kakimoto, who says, "Since earnings are not looking good, there is no incentive to buy Tokio Marine's shares unless we see a distinct business strategy for potential growth."
(The Nikkei Financial Daily Wednesday edition)
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