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Japan stock bible gets hot, suggesting Nomura set to prosper

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The trend bodes well for Nomura Holdings and Daiwa Securities Group, which report earnings this week and stand to benefit from an increase in stock trading by retail investors.

[TOKYO] Things are looking up for Japan's biggest brokerages, if demand for a well-known stock handbook is any guide.

Copies of Kaisha Shikiho, widely regarded as the bible of Japanese equities, are being snapped up by people eager to find out more about the nation's soaring stocks. Sales of the latest edition released on Dec 15 are up 50 per cent from a year earlier, according to publisher Toyo Keizai.

The trend bodes well for Nomura Holdings and Daiwa Securities Group, which report earnings this week and stand to benefit from an increase in stock trading by retail investors. 

Individuals are returning to Japanese equities that have risen to levels unseen since the aftermath of the nation's asset bubble collapse more than a quarter century ago.

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"Individuals are buying Shikiho because they see people around them making money from investments, and so they want to study up on stocks," said Masatoshi Kikuchi, chief equity strategist at Mizuho Securities in Tokyo.

Stock transactions by individuals at the country's major bourses rose 15 per cent in 2017, the most in four years, according to Japan Exchange Group Inc. The gains accelerated to 33 per cent in the last quarter - the period that Daiwa and Nomura are reporting results for on Tuesday and Thursday, respectively.

Goldman Sachs Group upgraded its ratings on Nomura and Daiwa shares this month, citing a recovery in their retail business. "We expect the stock market to continue to perform well in 2018 and individual investor sentiment to recover along with this," Goldman Sachs analyst Katsunori Tanaka wrote in a note on Jan 19.  Brokerages are among the best performers on the Topix index this year. An index of securities firms has climbed about 10 per cent, more than the benchmark's 3.9 per cent gain. The Topix reached the highest since June 1991 on Jan 23.

Bookstore Demand

The last time demand for the quarterly Kaisha Shikiho handbook surged was five years ago, when stocks were jumping after Prime Minister Shinzo Abe took office promising aggressive monetary and fiscal stimulus.

Brokerages benefited from that rally, with Nomura enjoying a profit revival as its domestic retail business made up for losses abroad. That wasn't sustained, however, after individual investors went back into their shells. More recently, overseas operations have become profitable even as the firm suffers from the global slump in fixed-income trading.

Now, the sense of revival at home is being felt across Nomura's 158 branches around the country.

"The number of inquiries from retail customers and requests for investment seminars have rapidly increased compared with recent years due to the current share surge," said Satoshi Chida, a Nomura branch manager in Nagoya, an industrial center in central Japan. 

Nomura's domestic retail business generated 23 per cent of pretax profit in the year ended March 2017, down from 53 per cent during the boom three years earlier. Annual earnings from the division are on track to rise for the first time in four years. 

Mizuho's Kikuchi said that overseas institutional investors, which are major players in Japan's stock market, may increase buying once they see individuals moving more of their savings into stocks.

Japanese households have US$17 trillion in financial assets, of which about half is sitting in cash and deposits.  Kaisha Shikiho, which costs 2,060 yen (S$24.82), has about 2,000 pages of information on stocks including charts, earnings and shareholders. Bookstores have been calling to request more copies, said Masatoshi Kato, a manager of general affairs at Tokyo-based Toyo Keizai.

"The recent share surge must have prompted Japanese individual investors to act," said Mr Kato.

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