The past year in the Japanese equity market has kept investors — and their sell-side sales teams — on their toes.
“[The] Japanese market reached an inflection point last year,” wrote Shinji Ogawa and Khahlil Kirtman, co-heads of Japan Cash Equity Sales, JPMorgan Securities Japan, in an email.
While 2024 saw the Tokyo Stock Exchange enter its second year of reforms encouraging listed corporates to focus on capital efficiency, there are also early signs of an end to a 30-year period of deflation. “Despite these changes, global investors remain underweight in Japanese equities,” Ogawa and Kirtman added. “We anticipate the level of interest from investors will continue to rise further.”
Yoshinori Arai, head of portfolio advisory of the Multistrategy Consulting Dept. for Nomura Securities, agreed. “Investor response was initially slow but beginning in March we saw a steady rise in inquiries from overseas investors. This surge in interest led to a strong performance throughout the year.”
Arai reported that Nomura’s sales team in Japan has worked diligently to persuade domestic investors not to overlook the transformations taking place within Japanese corporations. “We consistently provided updates on the reaction of overseas investors to the evolving landscape of Japanese corporates and the economy,” he added.
Members of II’s 2024 Japan Sales Team were recognized for the ability to keep the buy-side informed amid rapid change. After taking the crown last year, Daiwa has defended its title as the No. 1 sales team in the country.
Further down the leaderboard, there was a shuffling of the top providers. Nomura increased one position to take second this year, while JPMorgan had the ranking’s largest jump and moved from fifth place to third. SMBC Nikko Securities fell two spots to fourth, and Mizuho Securities was down one spot to round out the top five.
Respondents were asked to rate firms with the best sales team based on six performance attributes. Daiwa topped four out of six of those: adding value to research, idea generation, service and responsiveness, and understanding client needs. JPMorgan was No 1. for global context, and Nomura was recognized for market knowledge and feel.
A firm’s success is dependent on a salesperson’s ability to understand both investor positioning and market fundamentals, according to Nomura’s Arai. “A top-performing salesperson should possess an in-depth understanding of how investors take positions in the market. In 2023, stock performance was largely influenced by supply and demand dynamics, rather than fundamentals. Consequently, sales professionals were tasked with comprehending investor positioning in addition to conducting fundamental analyses to generate alpha.”
At JPMorgan, Ogawa and Kirtman credited the firm’s culture of collaboration and ability to be nimble. “We differentiate ourselves through our intense focus on collaboration to deliver the breadth of the JPMorgan platform to clients.”
The rest of the year appears studded with equal parts opportunity and obstacle. According to Nomura’s Arai, “the ongoing discourse regarding capital efficiency is greatly influencing Japanese companies, and we believe return on equity levels could potentially rival those of Western peers.”
But Arai is concerned about consumption in the country. “The declining population in Japan, coupled with the vulnerability of elderly individuals with limited income amid potential inflationary pressures, presents a critical issue. It will be interesting to see how Japan addresses this systemic challenge.”
