(Bloomberg) — Warren Buffett is turning his attention to Japan, and the billionaire investor told the Nikkei he is considering boosting his stock investments in the country shortly after Berkshire Hathaway Inc. began a yen bond sale.
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Shares of Japan’s top trading houses rose after Buffett said he increased his holdings in them to 7.4% from around 5% in 2020 and is looking to increase his exposure to the country’s stocks, according to the Nikkei report.
Buffett, 92, is currently in Japan and plans to meet with different company leaders and “just have a discussion about their businesses and emphasize our support,” he told Nikkei, without naming the companies.
In the interview, Buffett compared Japan’s Big Five trading houses to Berkshire and said he would do business with them.
“We’d love for one of the five of them to come to us sometime and say, ‘We’re thinking of doing something really big or we’re about to buy something and we’d like a partner or whatever,'” he said, according to Nikkei.
He then added that while he has no stake in other major Japanese companies, “there are always a few that I’m thinking about,” Nikkei reported.
Buffett’s interest is “a reminder that attractive and well-priced investment opportunities exist in Japan,” said Lorraine Tan, director of equity research at Morningstar Asia. “Given what we know to be his preferences, he would be looking for well-run companies that enjoy economic moats that he believes are undervalued.”
Company officials did not immediately respond to a request for comment on the Nikkei story.
Japan’s trading houses, or “sogo shosha,” have deep roots in the country’s economy, dating back hundreds of years and providing everything from energy to food.
value stocks
Shares of Mitsubishi Corp., the world’s largest trading house, rose as much as 3%, the most since March 1. Mitsui & Co. rose as much as 3.7%, while Marubeni Corp., Sumitomo Corp. and Itochu Corp. also rose. . Japan’s Topix extended earnings after news of the report.
Buffett’s comments “may encourage foreign investors to invest in Japanese stocks, especially value stocks,” Hiroshi Namioka, chief strategist at T&D Asset Management.
Foreigners have sold Japanese stocks and futures on the Tokyo Stock Exchange for the past three weeks after the international banking crisis in March, though they remain net buyers so far this year. Over the past 12 months, the MSCI Asia Pacific excluding Japan Index has fallen 8.6%, compared with a 0.8% drop in the broader Topix using dollar terms.
It is not clear how long the market momentum will last from his comments to the Nikkei.
“Buffett’s investments a few years ago didn’t fire up the market much in the short term, other than in stocks he picked or the like, but I think it did have a moderately positive effect in the medium to long term on foreign perceptions. Japan market,” said John Vail, chief global strategist at Nikko Asset Management Co., adding that this would also support domestic optimism.
Trading houses in Japan have already gained over the past year, as companies such as Mitsui and Mitsubishi expanded buyback program plans in February. The company’s earnings have also been boosted by higher energy prices. Shares of Japan’s largest trading company, Mitsubishi, rose 14% last year, compared with the broader Topix index, which rose 5.4%.
On the other hand, Berkshire’s US holding company will price its new bonds as early as this week. Proceeds from the offering will be used for general corporate purposes, including the refinancing of certain debt. Berkshire has already begun marketing a seven-tranche bond sale, according to a person familiar with the matter.
The legendary investor’s company is offering wider credit spreads on the new deal tranches than when it last tapped the market in December, as speculation about the BOJ’s withdrawal from ultra-easy policy boosted yield premiums this year.
Omaha, Nebraska-based Berkshire is one of the largest foreign issuers of yen bonds, data compiled by Bloomberg show. The firm surprised Japanese markets in 2020 when it bought shares in local trading companies after selling one of the largest yen bond offerings by a foreign firm.
The developments come with Kazuo Ueda taking the helm at the Bank of Japan this month. Ueda pointed out at his inaugural news conference on Monday that any significant policy changes may be unlikely at the moment.
–With the assistance of Winnie Hsu, Yasutaka Tamura, Katherine Chiglinsky, and Hideyuki Sano.
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