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Reuters
a day ago
- Business
- Reuters
Japan firms face record activist shareholder proposals, raising reform pressure
TOKYO, June 20 (Reuters) - Activist investors submitted shareholder proposals to a record number of Japanese companies holding annual general meetings in June, adding to pressure on firms not used to friction to improve shareholder returns and profitability. Since former prime minister Shinzo Abe, who stepped down in 2020, called for improved governance to attract foreign capital, activists have ramped up efforts, arguing Japanese stocks are undervalued and that companies allocate capital inefficiently. Over 2,000 firms hold shareholder meetings in June, of which 52 have received activist proposals, surpassing last year's record of 46, showed data from Mitsubishi UFJ Trust and Banking. That is more than four times the 12 companies that received proposals in 2018 and 2019 toward the end of Abe's tenure. Typically most proposals by activists and engagement funds are rejected. Still, some firms have subsequently introduced plans to increase returns even after unsuccessful votes. "There's no need to despair. Even if a proposal is rejected management may continue to consider it," said strategist Nozomi Moriya at UBS Securities. "I think it's important to look at corporate action over the long run." There is also an increasing number of cases in which firms adopt activist suggestions - in part or in full - in advance, to avoid a public proposal and any embarrassment to management that might bring. "It's not that we expect to win our AGM proposals, a lot of them now get withdrawn before the meetings take place" said Paul ffolkes Davis, chairman of Rising Sun Management, an activist investment advisor to the Nippon Active Value Fund. "The fact that we've never won one publicly doesn't mean to say we've never won one privately. Portfolio companies are engaging with us and acting on our suggestions more and more," Davis said. The Tokyo Stock Exchange in January last year began publishing a list of firms that have disclosed plans to improve capital allocation and corporate value, a move widely seen as naming and shaming those that fail to disclose such plans. Starting this year, the bourse under CEO Hiromi Yamaji plans to highlight companies who have sought dialogue with investors. "The greatest of all the Japanese activists is Mr. Yamaji," said Davis. Companies used to only seek help after activists publicised their proposals. Now they commonly reach out after the first or second private approach, said Hiroo Shimoda, senior manager at Mitsubishi UFJ Trust Bank's corporate consulting division. "Before it was as though we were putting out fires after they had started. Now it's more like we're doing preventative fire-proofing work," Shimoda said. Since last year, the trust bank has expanded its advisory business for private activist engagement, including how to respond to approaches and whether disclosure is necessary. Investors more broadly point to greater openness by Japanese management to discussing strategy. "In the past we wouldn't really get access to management. Now, we're meeting entire boards in the majority of our portfolio names," said Joe Bauernfreund, chief executive of London-based Asset Value Investors. "There are still so many undervalued companies in Japan, which means we've got our work cut out for us over the next few years."
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Business Standard
03-06-2025
- Business
- Business Standard
OECD lowers India's FY26 growth forecast to 6.3%, UBS raises it to 6.4%
In its latest outlook, the Organisation for Economic Co-operation and Development (OECD) on Tuesday lowered its 2025-26 (FY26) growth forecast for India by 10 basis points (bps) to 6.3 per cent, even as UBS Securities raised its forecast for the same financial year to 6.4 per cent from 6 per cent estimated earlier. OECD expects that the risk of increased trade tensions, including the imposition of higher US tariffs on Indian exports, could dampen external demand and harm export-oriented sectors such as textiles, chemicals, and pharmaceuticals. On the other hand, UBS expects no 'significant' increase in the tariff rates against India and is hopeful of the US-India trade deal materialising soon. However, both UBS and OECD expect private consumption to strengthen gradually and become broad-based. 'Private consumption will gradually strengthen, driven by rising real incomes that are helped by moderate inflation, recent tax cuts, and a strengthening of the labour market. Investment will be supported by declining interest rates, and substantial public capital spending, but higher US tariffs will weigh on exports,' it said. Besides, OECD also lowered its FY27 growth outlook for India by 20 bps to 6.4 per cent. 'Better-than-expected domestic demand momentum (is foreseen), building on a climbdown of tariffs on Chinese imports, hopes of a likely US-India trade deal materialising (sooner than later), and the tailwind of sustained lower global crude oil prices along with pickup in household consumption growth as rural consumption gathers pace (on hopes of a favourable monsoon, and lower food prices) and urban demand improves on policy stimulus (income tax relief), softening inflation (supporting discretionary spending), and rate cuts,' the UBS note said. OECD, the 38-member grouping of developed nations, also cautioned against a less benign monsoon that would reduce agricultural output and rural incomes, thus pushing up food prices, and weighing on gross domestic product (GDP). It was also hopeful of one more rate cut of 25 bps by the Reserve Bank of India (RBI), over the 50 bps reduction the central bank has already delivered. 'Trade tensions may also discourage private investment in tradable sectors. Stronger-than-expected remittances and investment inflows, coupled with robust infrastructure implementation, could lift growth above current projections,' the grouping noted. UBS Securities also expected monetary policy to continue to do the heavy-lifting to support India's growth momentum. 'Given softer inflation, we expect the RBI to cut rates by an additional 50-75 bps in this cycle,' it noted. However, OECD painted a gloomier picture for the global economy as global growth is projected to decline from 3.3 per cent to 2.9 per cent for 2025 and 2026, citing the impact of a widening trade war triggered by US President Donald Trump's tariff policies. "The global outlook is becoming increasingly challenging. Substantial increases in barriers to trade, tighter financial conditions, weaker business and consumer confidence, and heightened policy uncertainty will all have marked adverse effects on growth prospects if they persist,' OECD noted.
Yahoo
30-05-2025
- Business
- Yahoo
UBS Securities' Moriya on Japan Markets, Strategy
Nozomi Moriya, Japan Equity Strategist at UBS Securities, discusses her outlook for Japanese markets and investment strategy. She speaks with David Ingles from the sidelines of the "UBS Asian Investment Conference" in Hong Kong.
Mint
27-05-2025
- Business
- Mint
UBS flags India's high-risk premium despite recent equities upgrade
Given that corporate earnings growth in India has been stable, the exorbitant risk premium—extra returns that investors expect from riskier assets—linked to Indian equities is unreasonable, global brokerage UBS Securities said. India traditionally carried a 20-25% risk premium versus other emerging markets. However, recently, that premium has soared to 60%, a level unjustified by the current pace of corporate earnings growth, Sunil Tirumalai, head of Emerging Markets and Asia Equity Strategy at UBS Securities, said during a virtual media briefing on Tuesday. Indian equities often carry a high risk premium, driven by their long-term growth story and the appeal of a young, consumption-led economy. But alongside this optimism come challenges like policy uncertainty, market volatility and currency risks that make investors demand extra returns. The premium reflects both optimism about India's future and the risks tied to it. Also read: Global stock markets not pricing in severe downturn just yet: Nomura's Karkhanis In late April, UBS Securities tactically changed their equity strategy for emerging markets to domestic and defensive-oriented sectors in view of global trade tensions, while upgrading stance on India to neutral from underweight. However, a stronger case to invest in India will likely emerge when corporate earnings growth picks up, manufacturing gains traction and US-India trade negotiations reach a breakthrough, Tirumalai said during the briefing ahead of the UBS Asian Investment Conference in Hong Kong. From September 2024 to May 2025, the Nifty 50 and the Nifty Midcap 150 indices went through a full peak-to-trough-to-rebound cycle—correcting 16% and 21%, then recovering 13–17% from their February and March 2025 lows, respectively, highlighted a 22 May report by Elara Capital. Yet, the market that has emerged looking fundamentally different, it read. 'The drawdowns were valuation-led and broad-based; the rebound has been rotational, earnings-supported on a selective basis, and anchored in lower-multiple segments." Meanwhile, even foreign inflows into India seem to be back as India is seen as a relative safe haven. Also read: PTC Industries: How high can the stock really go? 'FIIs turned positive on most of the emerging markets as news flow on trade and tariffs improved," said a report by BNP Paribas dated 14 May. Markets have reacted positively to the tariff pause, US-UK trade deal and rollback of recent tariffs between the US and China, the report said. Analysts suggested that a clearer global tariff outlook was essential for the return of FII flows. Over the past month, many believe that uncertainty surrounding tariffs has eased. As a result, Foreign Institutional Investors (FIIs) have purchased Indian equities worth $6.1 billion over the 16 trading sessions leading up to 8 May. According to a report by BNP Paribas, FII ownership in Indian markets, which had been on a downward trend for several years, has stabilized since February 2025. Net FPI investments in Indian equities turned positive in April, with inflows of ₹4,223 crore, following three straight months of outflows— ₹78,027 crore in January, ₹34,574 crore in February, and ₹3,973 crore in March. So far in May (up to the 26 May), FPIs have made net purchases totaling ₹14,429 crore, according to data from NSDL. Tirumalai said that when the dollar softens, emerging markets usually gain, adding that he expects the greenback to stay weak through the rest of 2025. Also read: This fertilizer stock rose 88% in a year. Will MSCI entry trigger further rally? A weak dollar makes emerging market assets like Indian equities more attractive to foreign investors, as their returns improve in dollar terms. It also eases funding conditions globally, encouraging capital flows into higher-yielding markets. In 2025 so far, MSCI EM has gained nearly 9% while MSCI India is up 3.4%. UBS Securities continues to favour China for now, citing its attractive valuations and comparatively stronger fundamentals. Meanwhile, J.P. Morgan noted that Chinese equities have recovered most of the losses since US President Donald Trump's 2 April "Liberation Day" tariffs announced to curb imports, like the rest of the world, but have lagged the performance of the EM benchmark, as well as the developed market benchmark. Within the emerging market pack, Chinese equities were the worst hit in the post-Liberation Day sharp de-risking, down 13% in less than a week, the 19 May report highlighted. 'We recognize that 90 days may not be enough for the US and China to deliver a trade agreement, and the tariffs noise is unlikely to go away, but we do not expect the US to again adopt an aggressive trade stance towards China, which could allow EM equities to trade better," said J.P. Morgan analysts in their equity strategy report, while upgrading their stance on emerging markets to neutral from underweight.
Economic Times
06-05-2025
- Business
- Economic Times
UBS finds 4 reasons to be bullish on Indian stocks, picks 4 fav sectors
UBS forecasts an 8% Nifty 50 upside over the next year, driven by a Rs 7 trillion consumption stimulus, lower oil prices, resilient rural demand, and attractive valuations. The brokerage favours financials, autos, real estate, and consumption sectors, while remaining cautious on IT, industrials, and pharma due to global uncertainties. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads UBS's top sectors for growth Caution on certain sectors Market outlook Tired of too many ads? Remove Ads UBS Securities has laid out four compelling reasons for its bullish outlook on Indian equities, forecasting an 8% upside for the Nifty 50 index over the next 12 months. The brokerage pointed to a consumption-driven recovery, aided by fiscal stimulus , lower oil prices , and strong rural demand as major growth a favourable macro backdrop, the brokerage is particularly optimistic on sectors like financials, autos, and real estate, while remaining cautious on industrials and sees India's market set for growth due to a combination of factors. First, the brokerage said it expects a consumption -led recovery in FY26 and FY27, underpinned by a substantial Rs 7 trillion consumption stimulus—equivalent to around 2% of GDP. This stimulus, combined with resilient rural demand driven by favorable agricultural conditions and rising rural wages, is expected to drive consumption growth despite a slowdown in personal credit UBS noted that falling oil prices are expected to aid GDP growth by lowering inflationary pressures, providing a positive macroeconomic environment for Indian UBS said it believes India is better positioned than its Asian peers to weather the potential fallout from US tariffs and a global growth slowdown. The country's relatively insulated economy, coupled with lower crude oil prices, positions it advantageously in an uncertain global UBS points to attractive valuations , with the market's one-year forward price-to-earnings (PE) ratio aligning with the 7-8 year historical average, further supporting its bullish brokerage is particularly bullish on four sectors, which it believes will lead the charge in India's recovery:UBS said it expects banking credit growth to pick up, driven by improved system liquidity, a favorable interest rate environment, and regulatory FMCG, two-wheelers, and travel are seen as prime beneficiaries of the consumption recovery, fueled by government stimulus and strong rural improved consumer sentiment, UBS sees strong growth potential in the two-wheeler and passenger vehicle is positive on the real estate sector, benefiting from recovering demand and supportive macro conditions such as lower interest UBS is optimistic about these key sectors, the brokerage is cautious on industrials, IT, and generic pharma exporters. UBS noted that government capex growth is expected to remain muted, and global growth risks continue to impact the IT and pharma said it expects the Nifty 50 to reach 26,000 over the next year, supported by a recovery in consumption and favourable economic conditions. However, it also cautions that a global growth slowdown could result in a 6% downside to the these risks, UBS's overall outlook for Indian equities remains positive, with consumption, lower oil prices, and strong rural demand seen as key drivers for the market's read | Tale of 2 countries: Pakistan stock market down 4% post Pahalgam attack, India's Sensex gains 1.5% (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
