Fidelity Unit Buys Japanese Banks on Cheap Valuations, Mark Buffett Says
FIL Investments (Japan) Ltd. is holding large Japanese bank shares as valuations become cheap considering earnings outlooks and assets, said the fund’s manager Mark Buffett.
FIL Investment’s Fidelity Japan Blue Chip Fund has invested in Japan’s three largest banks, Mitsubishi UFJ Financial Group Inc., Sumitomo Mitsui Financial Group Inc. and Mizuho Financial Group Inc. as of the end of July, said Buffett. The fund also holds shares in Sumitomo Trust & Banking Co. and Chuo Mitsui Trust Holdings Inc., scheduled to merge next spring, he said in an interview in Tokyo yesterday. Banks had the largest weighting with 24 percent of the $116 million fund as of July, he said.
Banks are “beating market consensus expectations with lower credit costs, trading well below book value and with dividend yields higher than many utility stocks,” Buffett wrote in an e-mail message on Sept. 6. “Even after all of the necessary equity issuance is complete, the market does not seem to want to recognize that you now have a sector that is over- capitalized, profitable.”
The country’s three largest banks have raised about 4.5 trillion yen ($53.5 billion) in capital by selling shares since December 2008. Banks were weighted a total of 6.4 percent by funds that invest in Japanese stocks as of July, according to the Investment Trusts Association, Japan, less than the banking industry’s 9.9 percent weighting on the Topix index.
Banks as a group have tumbled 32 percent for the 12 months ended Aug. 31, almost twice as much as the 17 percent fall by the Topix index. A measure of banks trades at an average of 0.7 times book value, compared with 1 time for the Topix.
“I’m not sure when, if ever, the market will take an interest, but I cannot see much more downside either, so I’m willing to be patient,” Buffett said.
To contact the reporter on this story: Makiko Asai in Tokyo at masai@bloomberg.net.
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