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A Return to the Global Stage
This week, two Japanese financial institutions stepped out of the shadows of the past to pick up stakes in some of their more recognized competitors. Japan's largest securities firm and investment bank announced the acquisition of Lehman Brothers' Asia Pacific, European and Middle Eastern businesses, including Lehman’s 5,500 employees in those regions, for an undisclosed amount. At the same time, Japan’s largest bank, announced that it had agreed to take an equity stake of up to 20% in Morgan Stanley for roughly $8.5 billion. These deals are expected to significantly boost both firms’ investment banking capabilities in geographic regions traditionally weak for them. It has been almost 20 years since Japanese financial institutions have had any presence on the global stage. At the end of 1989, the world’s top five banks in terms of market capitalization were all Japanese. Now, only one manages to squeak into the top 10. Japanese banks spent most of the 1990s and the early years of this century shoring up losses stemming from continuous declines in real estate prices. Losses were immense, forcing the Japanese government to inject public funds into many of the major banks, twice, from 1998 to 1999 and again from 2002 to 2003. The acquisitions mark a notable change from the conservative expansion strategies that have defined Japanese institutions over the past two decades. Japanese banks have been less impacted by the current financial turmoil than their U.S. counterparts, and are viewing this as "an opportunity of a lifetime" to acquire much-needed assets to pursue overseas expansion. What’s more—this may only be the beginning. At the end of August, Japan's largest securities firm had already prepared a $6 billion war chest for acquisitions and, earlier in the year, the country's biggest bank had set aside up to $14 billion for acquisitions. The difficult task of integrating the new investments into their business operations still remains. However, we view this as a step in the right direction. With industry leaders from Japan re-emerging onto the global stage, we suspect other major Japanese financial institutions may follow their lead. Kenichi Amaki *As of June 30, 2008, the Matthews Asia Funds held no positions in Lehman Brothers or Morgan Stanley.
Single country and sector funds may be subject to a higher degree of market risk than diversified funds because of concentration in a specific sector or geographic region. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Matthews does not accept any liability for losses either direct or consequential caused by the use of this information. |
