As Suga heads to U.S., Japanese stocks with ties to
China take a beating
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[April 15, 2021] By
Hideyuki Sano
TOKYO (Reuters) -Japanese firms with strong
Chinese ties are seeing their shares fall ahead of a meeting of Prime
Minister Yoshihide Suga and U.S. President Joe Biden, as investors fear
pressure to align Japan more closely with Washington's tough stance on
Beijing.
Shippers, retailers and manufacturers of various machines and components
with significant dependence on Chinese demand could bear the brunt of
further diplomatic tension in the form of trade restrictions or popular
boycotts, analysts said.
Suga will on Friday become the first foreign leader to visit the White
House since Biden took office in January, widely seen as an indication
by both countries as a desire to revitalise their alliance to counter
China's growing clout.
"Suga may be asked to come in step with Washington's hard-line stance on
China, which could worsen Sino-Japanese relations," Daiwa Securities'
Chief Technical Analyst Eiji Kinouchi said.
Given Japan's proximity to China, both geographically and economically,
any negative impact from worsening relations would be greater on Japan
than on Western allies, Kinouchi said.
Japan has taken a softer approach to China, its largest trade partner,
on issues as varied as trade and the origins of COVID-19 that have put
the world's most populous country at loggerheads with the United States
and its allies.
It stayed out of the West's coordinated sanctions on Chinese officials
last month related to alleged human rights abuses in China's Xinjiang,
which China has denied.
A senior Biden administration official also said Taiwan and preserving
the status quo across the Taiwan Strait would be part of the United
States' upcoming talks with Japan.
"Suga will probably get more vaccines from the U.S. In return, he will
likely be pressed to get tough on China. So shares of companies with
high exposure to China are now capped," said Arihiro Nagata, general
manager of global investment at Sumitomo Mitsui Bank.
RETALIATION FEARS
Hiromichi Shirakawa, vice chairman and chief economist for Japan at
Credit Suisse, said concerns about Suga's visit were weighing on the
entire Japanese stock market. "The Nikkei has been capped below 30,000
and that certainly reflect some such concerns."
[to top of second column] |
Japanese Prime Minister Yoshihide Suga announces that Tokyo, Kyoto
and Okinawa will have pre-emergency status under a new prevention
law during a government task force meeting at the prime minister's
office, Tokyo, Japan, April 9, 2021. Eugene Hoshiko/Pool via Reuters
Investors fear any shift by Japan to a more hardline stance on contentious
issues could prompt Chinese retaliation, official or otherwise, against Japanese
interests, analysts said.
The stock price index of Japanese shippers, for whom Chinese demand is widely
considered vital, has fallen 5.8% so far this week, versus a 0.4% fall in the
broader Nikkei.
Some electronic components makers that had benefited from a global chip shortage
have also fallen out of investors' favour.
TDK Corp, which sells over half of its products to China, lost 6.6% this week.
Among others with high Chinese exposure, Taiyo Yuden Co Ltd fell 6.6% and Nitto
Denko Corp shed 2.6%.
Yaskawa Electric Corp's fairly upbeat earnings on Monday failed to prevent its
stock from falling. Its figures showed China accounted for a quarter of its
sales in the last financial year, versus 19% a year earlier.
In retail, the owner of household goods and clothing chain Muji, Ryohin Keikaku
Co Ltd, suffered a backlash from Chinese netizens last month when it said it was
"deeply concerned" about reports of forced labour in Xinjiang.
On Wednesday, it said a third-party auditor found no grave breaches of any rules
at its Xinjiang organic cotton field. Its stock fell 4.8% on Thursday and is
down as much this week.
Fast Retailing Co Ltd, owner of the Uniqlo casual clothing chain - which has a
big presence on Chinese high streets - saw its stock fall heavily on Monday.
The China branch of the cotton trade body Better Cotton Initiative said last
month it had not found signs of forced labour related to cotton production in
Xinjiang.
(Reporting by Hideyuki Sano; Additional reporting by Tomo Uetake; Editing by
Christopher Cushing and Alison Williams)
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