The largest equity center in the world
Not so long ago Tokyo was all the rage. The late 1980s saw many large multinationals rushing to list on the Tokyo Stock Exchange, desperate not to miss out on the chance of attracting some of the huge pool of Japanese savings.
It was probably a question of prestige. A Tokyo listing was seen as a status badge for many European and North American companies eager to establish themselves as leaders in the global race. Japan's massive market tempted their sales forces, so why not back up the business operations with the higher profile afforded by a listing?
Then it all started to go sour. Few international companies saw much liquidity in their stock on the TSE, and the cost of maintaining a listing compared to the benefit gained was deemed by many to be too great. The pull-out started as a trickle and then turned into a rush about four years ago.
Today, though, there is a renewed interest in Tokyo for many larger cap companies burnt by the listing experience of a few years ago. But this time round, they are wisely approaching the question of attracting Japanese funds with more caution. The financial liberalization of the Big Bang process is making many executives in the western world sit up and notice Tokyo once more.
Talk of the need to increase returns forcing the massive Japanese institutions into taking more interest in foreign stocks has led several companies of late to include Japan on their roadshows for the first time. Those IROs at large cap companies in the west who haven't yet discovered what Tokyo could offer them should certainly be thinking about making some tentative inquiries before Big Bang really takes off.
One thing, of course, won't change in the foreseeable future, despite the reform process. Indeed, that's just the reason why the interest in the Japanese institutional market is reawakening. Tokyo is the largest equity center in the world - by a long way. The latest figures from Technimetrics reveal a whopping $1.6 trillion of equity funds under management in the city. It beats London and New York hands down, which manage some $1.2 trillion and $1.1 trillion respectively.
Admittedly, only a relatively small proportion of Tokyo's funds are pointed in the direction of foreign companies at the moment. But the sheer size of the total funds under management still make it a significant amount. For example, holdings of US equities stand at around $51.3 bn and of European equities at around $50.8 bn. And if Big Bang lives up to even some of its expectations, the foreign equity portion could grow very rapidly in the near future.
Rice & Spice
First time IR visitors to Tokyo may be in for a culture shock. But as you drive the 66 kilometers from Narita Airport towards the center of the city you might wonder what the talk of sprawling urban mass is all about. For the first half hour you are surrounded by rice fields. Even by most large cities' standards, Narita is a long way from the middle of town and you'll be subject to at least an hour's journey into the center - considerably more with bad traffic.
Then the sprawl begins. It would be hard to call Tokyo a beautiful city, although it certainly has its attractions. If overhead expressways, pollution, constant bustle and a certain ordered bedlam are your cup of tea then you are going to feel at home there. It's hard not to find something alluring about the strange mix of modernity and ancient cultural traditions.
Your wallet may wish it had remained elsewhere, though. Tokyo easily lives up to its reputation for being one of the most expensive cities in the world. It's worth checking you've got enough flexibility in your gold card before picking up your chopsticks for a business lunch.
Luckily, the main business districts of Marunouchi, Otemachi and Nihombashi which are home to the bulk of institutions are bunched together and fairly compact. Most one-on-one meetings will be a short hop away from each other in a taxi or a map-clutching stroll through the chaos of two or three blocks.
A word of warning here. Most of the taxi drivers do not understand English and will often be unable to decipher a map unless written in Japanese. Many of your appointments will fax you a Japanese map as a matter of course before your visit. If not, it's worth requesting one otherwise the resultant delays can play havoc with a tight schedule. Only the very brave IRO should descend into the multi-exit maze of the Otemachi subway station in rush hour as a means of returning to the hotel.
Hand-Holding
Indeed, language and cultural difficulties are likely to be major concerns of any western business traveller - particularly on their first trip. Those who have been visiting Japanese institutions for a number of years stress the need for a bit of hand-holding from a locally-based IR advisor or, at the very least, staff from your Japanese operations.
Ralph Edmondson, investor relations manager at the UK's BAT, has been making annual trips to the city since 1993 but he still relies heavily on the Tokyo office of Gavin Anderson for setting up his schedule and guiding him around while he's there. He and others point out that the fund managers who look after foreign equity investment can move in and out of jobs very quickly, often between your visits. So it's important to have help from someone on the ground in Tokyo who keeps abreast of the changing faces.
Most of the large, international public relations operations such as Dewe Rogerson and Hill & Knowlton have an office in Tokyo, although their IR capabilities for foreign companies vary greatly. Technimetrics also has a well-established and growing consultancy in the city and there are a number of independent IR advisors, such as IBI, on the ground with more opening up as demand grows. Again, check out their IR abilities extremely carefully before relying upon them to set up meetings. Many of the agencies will promise the world in a bid to get your business but you could find yourself giving a presentation to a bunch of fund managers with no real interest in your stock.
The rapid changing of jobs within the institutions is slowing, however, as the need to develop expertise and relationships over a longer period is recognized. Ross Rowbury, former head of foreign equity at BZW in Tokyo, says that the non-domestic investing role within Japanese institutions used to be seen as the poor performer's job, stuck away in the corner of the office somewhere. Now it's gaining more respect but the movement is still there.
More than ever, then, careful targeting is needed. 'Companies really have to make the effort to go and search out the right people at the institutions - use somebody with the right contacts - to get the access and do one-on-one meetings,' says Rowbury. 'You don't have to cover the whole range of 150 institutions, you only really have to do the top ten.' Not too difficult to squeeze into a two-day trip, but obviously pointless if you are talking to the wrong people.
Bowing Out
Most of those in the know scoff at the idea that visiting IROs have to make too many cultural concessions. Sure, be polite and respectful of the manner of doing business, but guests are not expected, for instance, to bow in greeting - a handshake will suffice.
That being said, there are various pointers which can help make a good impression. Edmondson says it is vital to have 'two pockets full of business cards' due to the great importance attached to them and to be prepared to 'drink green tea and indicate you enjoy it.' He agrees that any cultural faux-pas will normally be ignored but avoiding them altogether is obviously more ideal. Small gifts remain highly important in Japan and Edmondson says that giving presents related to your own business is a good way of being remembered.
Although most of the fund managers handling foreign equity speak English, advisors recommend that simultaneous translation be available for group presentations and that a Japanese speaker be present in one-on-ones. Certainly, all documentation should be available in Japanese.
Presentations are generally well attended if held close to the financial district and the correct people invited. The Imperial Hotel seems far and away the most popular venue, followed by the Palace Hotel. Most of the leading hotels can handle fairly large presentations and lunches, although their location relative to the business district should definitely be taken into account.
'You've got to make it easy for people to attend,' says Kenneth Adams, a fund manager at Hill Samuel asset management. 'There's usually quite a high drop-out rate on the day so if they've got to go across town to somewhere like Shinjuku you might be in trouble.'
One French IRO - who for obvious reasons wishes to remain anonymous - notes it is common for some members of a Japanese audience to fall asleep during presentations. Indeed, it is widely accepted. Expect it to happen and you are less likely to be put off your stride, he argues.
Edmondson is less direct. 'I think it's important to make your presentations fairly exciting and keep them animated,' he says. 'Not going over the top but just realizing that it's hard work understanding a presentation in another language.' He believes that if simultaneous translation is not available then you must, at least, ensure that a Japanese speaker is available to interpret questions to allow more complicated issues to be raised.
That point is backed up by a fund manager at one of the leading trust companies. He speaks very good English but prefers to be able to fall back on an interpreter for public questioning. 'If I am attending presentations then the translation helps out, particularly in getting an idea of strategy rather than just going over the figures.'
He adds that for group presentations, companies should leave time after the public Q&A for investors to have a private chat with executives. This allows the questions to be answered away from the glare of the competition.
On Your Marks
So how should an IRO go about approaching the Tokyo market for the first time? Deborah Hayden, vice president at Gavin Anderson, believes that doing a benchmark survey of your holders in the city before getting on the plane is absolutely vital. She concedes that finding out who your holders are can be a laborious task but it is well worth the effort prior to arriving.
'It can still be very hard for Tokyo-based fund managers to get information on international companies,' says Hayden. 'They regularly tell us that they do appreciate people coming out here and spending the time to brief them and run through the issues.' She adds that once you have started building relationships it's very important to keep a regular flow of information coming through and to keep coming back each year.
Kenneth Adams suggests that it is well worth an investor relations officer doing an initial trip or two to the city to pave the way at least a year before bringing out more senior executives. 'There's no point in chief executives coming at first, you need to approach it from a lower level,' he says. 'Also, some investors will find it intimidating if the number one person is there in the first meeting.'
Finally, be aware of the limitations of what you can achieve. Don't go to Tokyo expecting the number of Japanese investors in your stock to rocket after your first visit. It takes time, patience and persistence. The future looks rosy for large, international companies targeting Tokyo-based investors but the arrival of the big institutions on your register in great numbers won't happen overnight. Edmondson suggests that it is still best to tie in a Tokyo trip with the chance to get to know your Japanese or Asian operations - don't use it solely for IR purposes. That time may come though and those that have done the legwork now will hold the advantage over those who join at a later stage.
Top 15 Fund Management Institutions in Tokyo
(in alphabetical order)
- Judged by total equities under management
- Asahi Mutual Life Insurance Co
- Chuo Trust & Banking Co Ltd
- Dai-Ichi Mutual Life Insurance Co Ltd
- Daiwa Asset Management Co Ltd
- Meiji Mutual Life Insurance Co
- Mitsubishi Trust & Banking Corp
- Mitsui Mutual Life Insurance Co
- Mitsui Trust & Banking Co Ltd
- Nippon Life Insurance Co
- Nomura Securities Investment Trust Management Co Ltd
- Sumitomo Life Insurance Co
- Sumitomo Trust & Banking Co Ltd
- Yasuda Mutual Life Insurance Co
- Yasuda Trust & Banking Co Ltd
Source: Technimetrics Inc Tourist Information
Where to Stay
Imperial Hotel
1-1-1 Uchisaiwai-cho, Chiyoda-ku
Tel: +81 3 3504 1111
Fax: +81 3 3581 9146
Palace Hotel
1-1-1 Marunouchi, Chiyoda-ku
Tel: +81 3 3211 5211
Fax: +81 3 3211 6987
ANA Hotel Tokyo
12-33 Akasaka 1-chome, Minato-ku
Tel: +81 3 3505 1111
Fax: +81 3 3505 1155
Hotel Seiyo Ginza
1-11-2 Ginza, Chuo-ku
Tel: +81 3 3535 1111
Fax: +81 3 3535 1110
Where to Present
All of the leading hotels have presentation facilities. However, few aside from the Imperial and Palace seem to be in favor with the financial community.
Imperial Hotel
1-1-1 Uchisaiwai-cho, Chiyoda-ku
Tel: +81 3 3504 1111
Fax: +81 3 3581 9146
Palace Hotel
1-1-1 Marunouchi, Chiyoda-ku
Tel: +81 3 3211 5211
Fax: +81 3 3211 6987
Where to Eat
The leading hotels have some of the best cuisine available and are favored for business lunches. There is also a good selection of excellent top-end restaurants across the city catering for all tastes, including:
Japanese
Ten-Ichi, Ginza
Tel: +81 3 3571 1949
Fukuzushi, Roppongi
Tel: +81 3 3402 4116
International Maxim de Paris, Ginza
Tel: +81 3 3572 3621
Sabatini de Firenze, Ginza
Tel: +81 3 3573 0013
Trader Vics, Roppongi
Tel: +81 3 3265 4707
Where to Go
Imperial Palace
The palace and gardens dominate central Tokyo but the palace remains closed to the public.Nevertheless a stroll in the gardens and view of the Niju-bashi Bridge is recommended.
Senso-ji Temple
Seventh century shrine located in Asakusa. Now a post-1945 reproduction but still worth a visit.
Shinjuku
The area captures the essence of modern Japan. Shops, restaurants and excitement abound.