Eh, Heinz, Could this be it ... the leading edge of the 2002 Financial Tsunami ?
nni.nikkei.co.jp
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Friday, December 28, 2001
Gold Selling Briskly Ahead Of Limited Guarantee On Deposits
TOKYO (Nikkei)--Sales of gold ingots have soared in recent months, particularly since the beginning of December, as individuals try to diversify their investments ahead of the government's halt on full guarantees for deposits at bankrupt financial institutions in April 2002.
Gold ingot sales in December have tripled on the year at Tanaka Kikinzoku KK, the largest domestic dealer of the precious metal, while Mitsubishi Materials Corp. (5711) posted a 100% jump and Sumitomo Metal Mining Co. (5713) saw a 200% increase.
According to the World Gold Council, an international body handling gold data, net domestic gold sales, gross sales minus buybacks, totaled 13-14 tons through Dec. 27, a 200% jump from last December.
The council predicts brisk sales will continue for the next several months, posting the fastest growth rate in a decade, eclipsing the robust expansion seen immediately after the Great Hanshin Earthquake and the financial crisis at "jusen" mortgage lenders in 1995.
Analysts say another factor behind recent strong gold sales is that investors appear to be funneling part of their contract cancellation money for money market funds, which had included bonds of the bankrupt U.S. energy giant Enron, into gold purchases.
"An increasing number of investors are buying gold ingots in large lots, such as 10-20kg (1kg = about 1.3 million yen)," said an official at Tanaka Kikinzoko.
(The Nihon Keizai Shimbun Friday morning edition)
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or maybe this ... or perhaps it is a second storm front?
nni.nikkei.co.jp
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Issued: December 24, 2001
Corporations wince as shares unwind
Banks offload unpopular issues at low prices, forcing firms to take evasive action - if they can
ATSUSHI NAOI, HIROSHI TOYOFUKU and SHIGEYUKI YAMASHITA
Staff writers
Enlargement
Struggling to unwind cross-shareholding positions in corporate clients, banks are finding that they have to sell unpopular issues at weak prices. With few nonfinancial companies capable of taking countermeasures such as buyback of own shares against banks' sale of their stocks, some have begun selling bank shares.
Sales of cross-shareholdings will likely remain a cause of turbulence on the stock market even after the government sets up a body to purchase shares held by banks in January 2002, according to analysts.
"We will beat the deadline for limiting shareholdings by one year," Sumitomo Mitsui Banking Corp. President Yoshifumi Nishikawa told a meeting of analysts in early December. Nishikawa was referring to a newly enacted law forbidding banks from holding stocks in excess of their primary (tier-1) capital after September 2004. His comment was apparently aimed at dispelling market concern over slow progress in removal of cross-shareholdings.
The regulation on bank shareholdings is designed to improve the financial position of banks, which now carry a lot of exposure to stock market fluctuations. Sumitomo Mitsui needs to shave its shareholdings by nearly 1 trillion yen ($7.8 billion) over the next three years in order to abide by the new law.
Nishikawa pledged to reduce 1.4 trillion yen worth of shares in corporate borrowers by September 2003. The bank sold 160 billion yen worth of shares in the fiscal first half through September this year, and plans to unload 350 billion yen each half year.
Leading banks and banking groups have announced plans to unload shares roughly worth a combined 5 trillion yen in the year through March 2002, up 70% from the year before. Mizuho Holdings Inc., comprising Dai-Ichi Kangyo Bank, Fuji Bank and Industrial Bank of Japan, have also declared to reduce shareholdings to the required level one year before the deadline.
But living up to the plans is bound to be an uphill battle. "We couldn't sell cross-held shares in the remaining part of the year," a bank executive said, citing the weak stock market as a reason.
Selling on the depressed stock market means taking as yet unrealized capital losses, a tremendous burden for banks already reeling from scores of bad loans. Banks are running out of salable shares, according to one industry observer, and it is not rare for it to take one or two years before a buyer is found for limit orders on unattractive, thinly traded stocks. One-tenth the daily turnover is widely seen as the maximum the market can digest to offload cross-holdings without provoking sharp price declines.
Although a list of stocks that banks are ready to sell is circulating among some institutional investors, "Recently we can't find stocks on the list that we want to buy," said a fund manager with a foreign asset management firm.
According to a survey by Daiwa Institute of Research, domestic banks sold about 7.6 trillion yen worth of stocks over the two and a half years through September 2001. To comply with the new bank stockholding law, banks will have to sell an additional 7 trillion yen worth of shares by September 2004, according to the estimate.
It will not be an easy task for banks to sell off another 7 trillion yen since unattractive issues have tended to remain in their portfolios and the sagging stock market, if it continues in its funk, makes selling even more difficult. Nevertheless, banks need to proceed with selling shares to meet the deadline's shareholding cap, which is expected to erode the stock market further.
New capital adequacy-ratio rules by the Bank for International Settlements projected to be introduced in 2005 will increase the risk weight of shareholdings to such an extent as to "effectively bar banks from holding shares," a senior economist at Daiwa Institute noted.
Exchange-traded funds
To facilitate the sale of cross-held shares, Bank of Tokyo Mitsubishi has set up a 500 billion yen exchange-traded fund, 400 billion yen of which comes from the bank. The aim is to broaden sales channels by wooing individual investors.
With a minimum unit of around 100,000 yen, ETFs are easier for individual investors to buy and enables them to spread investments around to minimize risk. BOT-Mitsubishi plans to offer another ETF after the current one is sold out.
But not all banks have the right mix of stocks to accommodate this sort of repackaging, according to market observers. One bank that planned to launch a 500 billion yen ETF found it needed to procure an additional 270 billion yen worth of shares on the market, for instance.
The government intends to form a body to purchase stocks from banks in January 2002, but the details of the mechanism still remain unclear. Problems of how to dispose of purchased shares and reluctance of corporate borrowers to see their stocks sold to the body have yet to be resolved.
Matching proportions
An increasingly common response to counter-selling of shares is to sell bank shares in matching proportions. At Tokyo Gas Co., for example, counter-selling of bank shares accounted for more than half the 3.3 billion yen in profits on the sale of shares the company reported for the half year through September 2001.
A once-cherished system of mutual assistance is crumbling due to the dictates of cold business logic. As it becomes evident that banks can no longer afford to shed crossheld shares in a "gentleman-like" manner, corporate borrowers are turning their focus to "a way their shares can be sold to their advantage" by preventing their shares from being sold for the time being.
Kagome Co. took advantage cross-shareholding liquidation to increase individual shareholders, by launching in December the secondary placement of 8 million shares held by Tokai Bank and 10 other companies. The attempt was a great success, with all shares offered - more than 10% of the company's outstanding shares -selling out. The extremely high name recognition of the ketchup maker among housewives, as well as colorful, easy-to-read prospectuses, drew roughly 30,000 individual buyers.
For companies with deep enough pockets, one option is to buy back their own shares. On Nov. 30, Toppan Printing Co. paid almost 20 billion yen to absorb some 17 million shares of its stock previously held by BOT-Mitsubishi and Sumitomo Mitsui, preventing 2.5% of outstanding shares from flooding the market. Toyota Motor Corp. has so far bought back 400 billion yen worth of its own shares.
Some firms are looking to overseas markets for new homes for their stocks. A record number of Japanese companies are planning to sell American depository receipts backed by their existing shares next year, a U.S. banker said.
Only a handful of firms have the resources to take measures such as these to stabilize their stock prices. Most firms seem fated to watch the unraveling of cross-shareholdings depress prices of their shares at a time when many firms are adhering to strict restructuring measures.
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