3/09/2025

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Japanese investors leaving reflation trade to foreigners

India’s biggest lender SBI taps dollar debt days after country’s rating upgrade MUMBAI: State Bank of India (SBI) plans to raise funds by issuing dollar denominated bonds maturing in five years, three merchant bankers said yesterday, days after S&P Global Ratings upgraded India’s sovereign credit rating for the first time in 18 years. The country’s largest lender by assets is eyeing at least US$500 million (RM2.1 billion) through the issue, and based on the response, could go as high as US$1 billion, one of the bankers said. SBI is seeking bids and will finalise the pricing and quantum this week, the bankers added. “We have already seen a very strong investor interest, and expect a finer pricing than previous issue,” one of the bankers said. SBI did not reply to a Reuters email seeking comment. The bankers requested anonymity as they are not authorised to speak to media. The lender provided an initial guidance of US Treasury yield plus a spread of 105 basis points, but the bankers feel the actual cutoff may come below 100 bps as the issue is set to receive strong demand. The notes will be rated ‘BBB’ by S&P, in line with the issuer’s ratings. Last month, the global rating agency upgraded India’s long-term sovereign credit rating to ‘BBB’ from ‘BBB-’. Yields on the dollar bonds of SBI, widely considered as a so-called quasi sovereign issuer with credit ratings closely linked to the sovereign rating, had dropped after the upgrade, and will benefit the lender for fresh fund raising. More favourable placement oppor tunities are arising for state-linked entities and a broader category of banks and non-banking finance companies, said Maksim Zenkov, deputy head of emerging markets fixed income at financial data aggregator Cbonds. “The upward trend in the government bond yields serves as an additional stimulus to consider tapping the dollar debt market.” In November 2024, SBI raised US$500 million through five-year dollar bonds at a yield of 5.13%, which was at a spread of 82 bps over Treasury yield with similar maturity, the tightest spread achieved by the lender, per bankers. – Reuters

mark the highest since the Abenomics-inspired influx of 2013. “Foreigners aren’t the only entities buying though: corporates, through share buybacks, were even larger,” said CLSA’s Smith. “That’s very exciting, because corporates are awash with cash and could afford to buy a whole lot more.” Despite the outsized moves in stocks and bonds, the yen has proven relatively stable, remaining stubbornly within a 140-160 trading range for the past two years rather than strengthening on the prospects of stronger growth, or from a rush of investor fund flows lured by higher bond yields or equity returns. “The big story is the lack of repatriation flows,” said Brad Setser of the Council on Foreign Relations. Setser attributes the absence to Japanese institutional portfolios that invested heavily in US Treasury markets prior to Covid 19 now being effectively under water after the US Federal Reserve’s increases in interest rates. Put simply, Japanese capital is staying overseas rather than coming home to chase the gains. Analysts and traders are watching closely whether that will change as the Japanese markets spring into action. – Reuters

corporate reforms help Japan to ignite economic growth after almost three decades of lacklustre activity, the Bank of Japan (BOJ) raised interest rates this year for the first time since before the 2008 global financial crisis and has sold down its vast holdings of government bonds. That has stoked an asset rotation from bonds into equities, boosting beat-up industrials at the expense of flashier growth stocks, while favouring shorter-dated bonds to the longer dated end of the yield curve. Some analysts believe the rally in stocks could have further to run if Japanese retail investors resume buying, after pulling out some US$23 billion (RM97.2 billion) so far this year. “Retail sentiment is finally back in the positive since last week after hitting an extremely bearish level,” analysts from Bernstein said in a research report. Attributing retail investors’ caution to uncertainty over how US tariffs would affect Japan’s economy and market volatility, they said the combination of a recovery in earnings, strong foreign investor confidence and return of retail flow “looks quite supportive for markets”. Foreign flows into equities this year are the strongest of the past decade, and on track to

o Asset rotation to stocks from bonds, lack of repatriation flows puzzles analysts SINGAPORE: Japanese financial markets are undergoing a long-awaited reflation trade. There’s just one missing factor – the Japanese investor. Foreign buyers have been in the driving seat of a rally that has driven Tokyo shares to record highs last month and coincided with an appreciation of the yen. They have also been major sellers of Japanese government debt, causing yields on 30-year bonds to reach all time peaks. “Global investors have been a major driver of the rise in Japanese stocks,” said Nicholas Smith, a strategist at CLSA in Tokyo. “There is little sign of domestic investors chasing,” after a rally in the Topix from lows reached in April, he said, which has pushed the index up 34.2%. As supportive government policies and

APOLOGIES ... Japanese beverage group Suntory Holdings president Nobuhiro Torii (left) and executive vice-president Kenji Yamada bow to apologise at a press conference in Tokyo yesterday after CEO Takeshi Niinami, who is also chairman, submitted his resignation following a police investigation into his purchase of a supplement that may be illegal. – REUTERSPIC

MUFG to launch ¥100 billion Japan real estate fund TOKYO: Mitsubishi UFJ Financial Group plans to launch a ¥100 billion (RM2.8 billion) fund to invest in Japanese real estate, an executive at the country’s largest banking group told Reuters. and will target underperforming assets, seeking to improve their attractiveness. It will focus on mid-sized offices, residential properties and hotels in Tokyo, Osaka and Nagoya, Uchida said in an interview.

announcement by insurer Dai-ichi Life and trading house Marubeni in July that they will launch a 400 billion yen fund targeting domestic real estate. Financial services firm Orix in February announced a 100 billion yen real estate fund. Morgan Stanley is also raising about 100 billion yen in equity for a Japan real estate fund, Reuters reported earlier this year. Mitsubishi UFJ’s real estate asset management arm had more than ¥500 billion in assets under management at end-August and aims to expand that to ¥1 trillion by the fiscal year ending March 2030. It has doubled its headcount in the last two years and aims to increase staff to 90 from 70 currently. – Reuters

About ¥30 billion in equity would be raised from institutional investors such as life insurers, banks and companies, with the rest financed by debt, he said, adding that marketing has begun and feedback from investors has been positive. The fund is separate from a property fund announced in April by MUFG with Mitsubishi UFJ Trust and Banking that is targeting an investment of ¥100 billion in real estate in three years. Other recent fund plans include an

The new fund, reported by Reuters for the first time, is the latest in a run of Japanese property fund launches this year as real estate prices climb and the central bank looks to hike interest rates further from still ultra-low levels. “In a world with interest rates, investors’ expectations of returns are rising,”said Naokatsu Uchida, president of Mitsubishi UFJ Real Estate Asset Management, which is launching the fund. The fund will be the unit’s second-largest

Uchida says investors’ expectations of returns are rising. – REUTERSPIC