Credit Suisse backs Japanese firms whose products might help fight climate change
By Makiko Suzuki
Bloomberg News
Friday, April 13, 2007
TOKYO: Investors should buy shares of Japanese environment-related companies like Toshiba and NGK Insulators, Credit Suisse said, on the view that they will benefit from expanding business opportunities.
Shinichi Ichikawa, chief strategist at Credit Suisse in Tokyo, wrote in a report published Wednesday that global warming was a threat that would prove costly. "Yet it also provides significant business opportunities," he said. "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, the biggest Japanese supplier of nuclear power reactors; NGK, a maker of exhaust filters; and Toyota Motor, the maker of the world's best-selling gasoline-electric hybrid cars.
Stocks related to nuclear power are particularly attractive, said Ichikawa, who sees it as a key solution to economic growth and greenhouse gas suppression.
He also said that Japanese companies would benefit from rising demand for their products and services in China, since its government is inclined to address environmental problems.
"We plan to recommend that global investors buy Japanese environment-related stocks for at least another one to two years," said Kyoya Okazawa, managing director at Credit Suisse's equity research division. "There are few companies that can provide the necessary products and services, and Japanese players are undervalued compared with their overseas rivals."
Ichikawa said that nuclear power was the only "viable" alternative energy source that could replace crude oil and meet conditions of price, stability and safety. All the other so-called new energy sources, like wind and solar power, would play only a supplementary role for at least the next two decades, he wrote. More than 100 new nuclear reactors are scheduled for construction worldwide by 2020.
Mitsubishi Heavy Industries, 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 in Texas.
Toshiba says that it expects sales in its nuclear construction, maintenance and fuel businesses to more than triple by 2015, helped by its purchase of Westinghouse Electric.
Hitachi, 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.
The Japanese prime minister, Shinzo Abe, and the Chinese premier, Wen Jiabao, signed an agreement Wednesday to fight global warming during Wen's first trip to Tokyo as premier.
The Japanese trade minister, Akira Amari, and Ma Kai, director of the Chinese National Development and Reform Commission, signed a communiqué highlighting energy-saving efforts by the two countries and the development of clean coal technology on the same day. The accord also included a pledge by Japan to continue efforts to help China operate and build nuclear power plants safely.
Ichikawa also recommends companies with technology to improve efficiency at existing power plants and to reduce greenhouse gas emissions because they will also benefit from a shift in environmental policy by China.
On Wednesday, China gave a commitment to participate in negotiations to reduce greenhouse gas emissions from 2013, after the Kyoto Protocol expires. At present it is not obliged to reduce its emissions.
Ichikawa said business opportunities for such companies would increase globally, helped by the Kyoto Protocol, which allows emissions trading and encourages industrial nations to help emerging countries cut gas emissions.
At the start of this year, Ichikawa said investors should buy Toyota and East Japan Railway, the largest Japanese train operator, on prospects that global economic growth would increase corporate earnings.
The 14 stocks Ichikawa recommended are: Chiyoda, Honda Motor, Ishikawajima-Harima Heavy Industries, Isuzu Motor, JGC, Kyocera, Mitsubishi, NGK Insulators, Sharp, Sumitomo, Suzuki Motor, Toshiba, Toyota Motor and UBE Industries. |
