JAPANESE HESITATE TO INVEST IN WEST GERMAN STOCKS
Japanese investors are reluctant to buy
West German stocks, now considered one of the most attractive
buys around after having taken a beating for the past two
years, investment managers said.
    Although the Frankfurt stock market is one of the world's
largest in capitalisation, wealthy Japanese institutions view
it as too small. They also worry about venturing into a market
from which British investors have recently bailed out, they
said.
    "There's not enough turnover there to absorb the amount of
buying Japanese want to do," one West German investment manager
said. There is a danger Japanese institutions may be unable to
liquidate their holdings quickly if the market takes a sudden
downturn, he added.
    "Japanese familiarity with West German stocks is also
limited," another investment manager said. "They know the blue
chips, but there are too many other names they don't know."
    The recent rapid advance of the Tokyo stock market has also
deterred Japanese from wandering off to markets abroad,
investment managers said.
    Japanese fund managers are afraid of criticism if they buy
into unsure overseas markets while the market at home continues
to advance, said Seiji Yamamoto, senior manager at Dresdner ABD
Securities Ltd's Tokyo branch.
    If gains from investments abroad lag behind those possible
from the Tokyo market, they could face difficulty explaining
their funds' performance, he added.
    The Frankfurt market's 15 pct depreciation just since the
beginning of this year has also been causing Japanese investors
to turn away, one investment manager said.
    The Frankfurt slump stems from expectations of slow
corporate growth due to the mark's strength against the dollar
and a withdrawal of funds by British institutions just before
the London market's liberalisation last year, the investment
manager said. "Right now Japanese investors are taking a
wait-and-see attitude while the condition of the market remains
unfavourable," he said.
    Although there has been some nibbling of West German
stocks, particularly last week, most of the buys were for
short-term trades rather than long-term investments, an
investment advisor at a West German firm said.
    Investment managers believe, however, that genuine interest
in West German stocks could develop within the next three to
six months.
    Japanese fund managers still favour the New York and the
London markets over the Frankfurt market but they are
interested in diversifying some of their funds, they said.
    Some managers have been travelling in Europe, looking for
new opportunities, and are unlikely to ignore West German
stocks, especially with the average price/earnings ratio at
about 11, they said.
    The Frankfurt ratio compares with about 16 for the U.S. And
London markets and 52 for the Japanese market, Guenter
Kirchhain, first vice president for Deutsche Bank AG said.
    "This mismatching will sooner or later generate an enormous
alignment potential," he said. The West German market could
reasonably have an average price/earnings ratio of around 16,
he added.
    Japanese investment plans may soon become clearer as many
institutions begin their new business years in April, he said.
    However, one fund manager does not agree that new
investment in West Germany will come that soon.
    "Japanese do not buy into a market with declining
fundamentals," he said. When West Germany's fundamental economic
indicators appear to have bottomed out, that will be the
turning point for their investments, he added.
    Another manager said the Japanese are waiting to see the
investment trends set by U.S. And British investors in the West
German market.
    "They are waiting for someone to make the first move," he
said.
 REUTER
