By Anton Bridge and Scott Murdoch
TOKYO (Reuters) - Japan equity offerings have more than quadrupled in value this year, with investors encouraged by a surge in the Nikkei stock index to a 33-year high and signs that Japanese firms have begun to manage their capital more efficiently.
A tough 2022 for equity capital markets globally resulted in a backlog of fundraising deals. Japan has also benefitted from far lower interest rates than other countries, billionaire Warren Buffett's lifting of stakes in Japanese firms and a re-allocation of funds away from China amid tensions between Beijing and Washington.
Proceeds from initial public offerings and secondary share and convertible bond issues soared 343% to $23.7 billion in the first nine months of the year, LSEG data showed. The number of deals climbed by a third.
In contrast, equivalent data for China shows a 29% decline in proceeds, albeit to a much bigger $104.3 billion, on an 11% drop in the number of deals.
There were 73 Japan IPOs during the nine months that raised a combined $3.3 billion, nearly four times as much as the same period a year earlier. They included a $625 million offering from Rakuten Bank.
Chip tool maker Kokusai Electric's planned 111 billion yen ($740 million) offering - currently in train for an Oct. 25 listing - is set to be Japan's largest IPO in more than five years.
Successful listings both in Japan and elsewhere could encourage more IPOs, said Yusuke Minowa, head of equity capital markets at Goldman Sachs Japan.
"Companies are looking at some of the recent major IPOs and if they perform well that is going to give confidence to some companies to move ahead with their plans."
Other notable offerings included Toyota (NYSE:TM)'s sale of about 250 billion yen worth of shares in KDDI (OTC:KDDIF), or about 20% of its holding in the telecoms company - an example, bankers said, of an acceleration in the unwinding of Japan Inc cross-shareholdings.
Bankers say investors have been particularly enthused by the Tokyo Stock Exchange's call in March for companies to disclose plans to improve capital efficiency, especially if their shares are trading below book value.
That has triggered a wave of share buybacks and dividend hikes and helped the Nikkei climb by roughly a quarter for the year to date compared with an 11% increase for the S&P 500.
"The Nikkei has plateaued at this higher level – and may yet go higher – rather than falling back straight away, so I expect the positive feeling to continue," said Tsunenori Hanakura, general manager of equity capital markets at Mitsubishi UFJ (NYSE:MUFG) Morgan Stanley Securities.
Institutional investors, from hedge funds to long-only funds, have been rebuilding their Japan positions since April, according to Goldman Sachs' Minowa.
"Those international investors had been underweight and they are still underweight but they are starting to pick up their exposure," he said.
Hayato Takei, head of equity syndication at Mizuho Securities, said major U.S. funds are still around 20% underweight Japan compared to benchmarks which means momentum for Tokyo's equity capital markets is likely to remain robust.
"Now everyone is focused on whether the Nikkei will rise further," said Takei.
($1 = 149.5300 yen)