Wednesday, June 7, 2006

Foreign Investors Taking Murakami's Arrest In Stride
NEW YORK (Nikkei)--In contrast to the Nikkei Stock Average's sharp drop the day after the arrest of investment fund manager Yoshiaki Murakami, foreign investors seem relatively unperturbed, with many of them focusing on the strength of the Japanese economy.

Sid Klein of Japan Asia Investments Canada called the scandal just a trigger for selling and said it will not cause confidence in the Japanese market to decline.

Shigeki Makino, chief investment officer of Putnam Investments' Global Core team, offered his view that the current correction in the Japanese stock market is temporary.

"Japan is still recovering after a recession, so we can expect growth for the future," he said.

Murakami's arrest was reported extensively outside Japan. Andrew Smithers, a well-known investment consultant from the U.K., argued that this is a welcome development because it means that the monitoring functions of regulatory authorities worked.

Tai Hui, an economist with Standard Chartered Bank in Hong Kong, said the incident will likely have a limited impact on Japan stocks. In fact, it may lead to improved corporate governance at Japanese firms, he predicted.

Although the Japanese stock market has been in a correction since April -- when foreigners started to sell more than they bought -- it appears that market participants based overseas do not expect the outflow of money to accelerate. They will likely maintain their cautious stance while keeping an eye on U.S. stocks.

An official from a European investment firm known for actively exercising voting rights said he hopes that Japanese companies will not see it in the same light as Murakami's fund just because both are investment funds.

(The Nihon Keizai Shimbun Wednesday morning edition)