Japanese Corporate Bond eand Equity Market
For foreigners the Japanese corporate bond market is not very transparent. Main barrier is the language problem and the way information is presented. In addition to that the Japanese corporate bond market has to be seen as part of the Japanese business culture. This means that the structure and quality of companies has always be seen in the light of their context in the Japanese economy.
Starting point for analysis is the keiretsu sytem which means a deep and supportive structure of a group towards different companies. This structure can not be seen directly or by analysing shareholder stakes only. About the keiretsu system there will be more information on this webpage soon.
For single corporate and bond analysis main focus will be at first on high quality corporate bonds with a negligence of real estate or property companies. Those companies lack transparency and have very often ties to 'anti-social' groups (better known as yakuza). There may be benefits from this kind of social intervowen structure, but for outside investors it will be not transparent enough for professional judgement of investments.
An important feature of the Japanese corporate market is the lack of transparency. A fair value price in a Bloomberg screen maybe not the price you will finally get. It always depends on the quote of the brokers. There are two major brokers in Japan. Nomura and Daiwa are the leading security houses and the main brokers who could give quotes in tight markets. This duopol leads and knows therefore the market quite well. It also leads to big bid/ask spreads in the Japanese corporate market. I will work on this to find out where there could be improvements.
For the equity market there are some interesting observations. The Topix future market which comprises more than 1300 companies seems to be less liquid than the Nikkei future market. The Nikkei future market can be traded even in then afternoon session which give a competitive advantage, because at that time the European market has already opened. In general the tracking error of future markets seems not to be very small. Very challenging are the March and September rollover dates.