Investment Trusts and Margin calls exacerbate the down move:
Thursday, April 20, 2000
Growth Funds Buckle As Sellers Target Large-Cap Techs
TOKYO (Nikkei)--Japanese investment trusts focused on domestic growth stocks are sinking in value, hit by declines in their major holdings, particularly high-priced information and communications shares.
The stock market swoon is causing problems on another front as well, with many of the funds experiencing redemptions by investors scrambling to raise cash to meet margin calls. According to market insiders, a number of investors have put up open-ended growth-stock funds to back margined positions, but the declines in value have triggered demands from brokerages for additional collateral.
As of Tuesday, the Morningstar index of 214 Japanese growth-stock funds had dropped 21% since the start of the year. The decline is all the more striking when compared with the 15% drop for the Morningstar index covering all domestic equity funds and the loss of just over 2% in the value-stock fund index.
Growth-stock funds have turned in strong performances thanks to the rally in equity prices since last year. But in some cases, the funds were driven up by gains in only a few holdings. That has left them vulnerable to price swings in issues with large market capitalizations, according to an analyst at Morningstar Japan KK.
A fund from Nomura Asset Management Co. focused on small-cap blue-chip stocks has lost 90 billion yen in net asset value over the past month. Its problems stem more from declines in expensive technology shares such as Yahoo Japan Corp. (4689) than redemptions by investors, the company says.
One Jardine Fleming Investment Trust and Advisory Co. fund has seen net assets fall some 50% over the past month, apparently on sell-offs in two of its biggest holdings -- Softbank Corp. (9984) and Hikari Tsushin Inc. (9435).
(The Nihon Keizai Shimbun Thursday morning edition)
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