The world's fund investment capacity is increasing

April 9, 2021 (Friday) sunny; at night it will be cold; SQ SAKURAII-san seminar recording

- The government will apply a set of measures akin to a state of emergency, called "Priority Measures to Prevent the Spread," to Tokyo.

Governor Yuriko Koike announced on the 8th that she would request its application, and made a decision.

They urged shortening business hours for restaurants to 8:00 p.m.

They told ruling party officials that Kyoto and Okinawa would also be targeted.

- Investors are putting increasing pressure on corporate efforts to address human rights issues.

Regarding the issue of China's Uighur minority, institutional investors are asking major global companies to disclose their trading conditions.

In Myanmar, where a coup occurred, there are concerns that continuing business by foreign capital would be support for the military regime.

In the United States, movements to expose Black discrimination are spreading, and companies are being asked about their stance on these issues as well.

- On the 8th, the U.S. Department of Commerce announced an almost total ban on exports to seven Chinese entities involved in the development of supercomputers and related organizations.

To prevent U.S. technology from being used for nuclear weapons and other military development.

The Biden administration's sanctions on Chinese companies are the first of their kind; U.S.-China tensions are intensifying.

- The investment capacity of global funds is rising.

Investee companies through things like initial public offerings (IPOs) and other means

Total funds raised in the stock market in January–March 2021 reached $94.1 billion (about 10 trillion yen), the largest quarterly total on record.

Most of this amount has been retrieved by funds, and large acquisitions like the possible takeover proposal for Toshiba Corp. (ticker: 6502) [closing price 4,510 yen] may increase.

Data from financial information company Refinitiv: funds raised for IPOs and the proceeds from selling SPACs (special purpose acquisition companies).

Since July–September 2020, three consecutive quarters of record highs.

The previous peak was during Oct–Dec 2006 at $48.8 billion, and January–March 2021 was 90% higher than that.

This was driven by a rapid recovery in stock markets, making it easier for investee companies to go public.

In January–March, 152 global companies backed by funds or investment firms went public.

As capital is being withdrawn, buyouts by investment firms and funds are expected to become even more active.

- A growing number of people are struggling to repay housing loans.

More than 50,000 people received relief such as loan deferrals from financial institutions, a figure five times higher than after the Great East Japan Earthquake.

Meanwhile, new loan approvals continued to rise, with some housing prices reaching levels not seen since the bubble era.

There is a simultaneous trend of increasing repayment difficulties and expanding new loans.

- Seven-Eleven Japan Co. (ticker 3382) [closing price 4,424 yen], Lawson, Inc. (ticker 2651) [closing price 5,340 yen]

The two leading convenience-store operators reported their consolidated results for the fiscal year ending February 2021, showing varying degrees of profit decline.

Seven-Eleven saw a 20% drop, while Lawson fell by 60%; the contrast between home delivery and product strengths is evident.

- There are growing concerns that hospital bed capacity is being strained due to the spread of the novel coronavirus.

In Sendai and Kobe, bed utilization reached 90%. Osaka Prefecture saw record-high new infections on the 8th.

The nationwide infection pace is accelerating. The spread of variants is pushing utilization up, and local governments are scrambling to respond.

- Toshiba Corp. (ticker 6502) [closing price 4,510 yen] began considering an acquisition proposal from British investment fund CVC Capital Partners.

CVC apparently proposed a purchase price of 5,000 yen per share, about 30% above the closing price on the 6th (3,830 yen).

This would value Toshiba at around 2.3 trillion yen, but

the assessment also depends on the value of Kioxia Holdings Corp. (formerly Toshiba Memory), a semiconductor memory company that holds about 40% of Toshiba's stock, which could influence the overall value by up to about 40% of Toshiba's stock.

Analysts estimate Kioxia's market capitalization could range from about 1.2 trillion to 2.6 trillion yen. Even just Toshiba's 40% stake would imply 500 billion to 1 trillion yen in value, a twofold range.

Activist investors are valuing Toshiba highly. At the 2020 annual general meeting, 3D Investment proposed a stake and valued Toshiba around 6,500 yen per share and a market capitalization of about 3 trillion yen.

- Sumitomo Corporation (ticker 8053) [closing price 1,554.0 yen] will embark on a business that reduces atmospheric greenhouse gases by improving farmland, and will sell emission allowances.

It is also estimated that soil improvement can enable absorption of CO2 through reforestation and other means.

Using farmland for decarbonization could expand options for emissions trading.

CO2 absorbed by plants will be stored as organic matter underground. A system called "soil sequestration" will be utilized.

They will partner with U.S. startup Indigo (Massachusetts).

- The Liberal Democratic Party is considering integrating related ministries to create a "Children's Agency" as the policy command center for child-rearing policies, merging the Child Welfare and Medical Science ministries with related departments at the Cabinet Office.

They aim to link effective policy operation to countermeasures for declining birthrates, with an aim to launch in fiscal year 2022.

- The tide of global corporate tax rate competition has changed.

The United States takes the lead. The Biden administration has shifted from the Trump era’s large tax cuts to a plan to raise taxes to fund infrastructure investments, etc.

As a G20 member, they aim to reach a global agreement including a minimum tax by mid-year.

- The Biden administration is also signaling a shift in currency policy away from the path of the Trump era.

At the G20 Finance Ministers and Central Bank Governors Meeting on the 7th, the joint statement changed its wording on foreign exchange.

They have clarified their stance of stepping away from the dollar-depreciation path.

- Teikoku Research Co., Ltd. (Tokyo: 8720) on the 8th noted that bankruptcies in fiscal year 2020 dropped 17% from FY2019.

Since FY1990, the lowest level in 30 years. Dormant or closed businesses not counted as bankruptcies are on the rise, making the business environment harsh.

Due to government and financial institutions' liquidity support amid the COVID-19 crisis, the number of corporate bankruptcies fell to 7,163, the first decline in two years. Debt totaled 1.2084 trillion yen, down for the third consecutive year.

The lodging industry saw a 72% year-on-year increase to 127 bankruptcies; information and communications fell 23%; manufacturing fell 22%; food services fell 7%.

- The Cabinet Office, on the 8th, said the leading index of the economy, the Diffusion Index (DI) for business conditions in March, rose to 49.0, up 7.7 points from the previous month.

Two consecutive months of improvement, but concerns remain as new COVID-19 cases rise.

The outlook DI dropped 1.5 points to 49.8, marking the first decline in four months.

- Several media reported on the 7th that former Vice President Mike Pence is negotiating with a major publisher for a multi-million-dollar deal to publish his memoirs.

Speculation that he is preparing to run in the 2024 presidential election.

- Global COVID-19 infection counts (new deaths day-on-day) as of 4:00 p.m. on 4/8, compiled by Johns Hopkins University: 133,131,000 worldwide (14,554 deaths)

United States 30,922,759 (2,588) Brazil 13,193,205 (3,829) India 12,928,574 (685) France 4,902,985 (13) Russia 4,554,481 (369) United Kingdom 4,381,830 (45)

Italy 3,700,393 (627) Turkey 3,633,925 (276) Spain 3,326,736 (126) Germany 2,940,279 (510) Colombia 2,478,617 (243) Poland 2,471,617 (638)

　

From here, published in [Koro Asa Premium].