Retail shareholders get rewards for investing in Japan firms

AN increasing number of Japanese companies are offering gifts to retail investors in an effort to expand their shareholder base.

As many as 56 companies have set up so-called shareholder benefit programmes since October, up 33 per cent from the total for the 12 months ending in September, according to Daiwa Investor Relations in Tokyo. The number of firms which established similar schemes each year had fallen since peaking at 106 in 2018.

More than a third of the some 3,800 firms listed on the Tokyo Stock Exchange already have such programmes, which offer retail investors items ranging from gift certificates to products, according to Daiwa Investor. Companies tend to announce the programmes in February before the fiscal year ends on Mar 31 and ahead of general shareholder meetings in May, it added.

"While the number of shareholders can increase at a relatively high rate after the programme starts, it tends to decline when the special benefits run out," said Masami Hamaguchi, a managing director at Daiwa Investor. Although the quantity of shares held per individual investor is not large, "it works in the direction of increasing stock ratio liquidity", she said.

Adding retail investors can help provide support for a company's stock in a market that's seen renewed pressure from a hawkish Federal Reserve and volatility from the yen's 16 per cent slump against the dollar this year. During the third week of June, individual investors completed the biggest net purchase of Japanese shares in over 4 years just as foreign funds were pulling out, data from the Tokyo Stock Exchange showed.

The renewed interest in benefit programmes may signal a change in corporate attitude. During previous years, many companies had avoided such schemes in response to the exchange's effort to increase shareholder equality through its Corporate Governance Code. In the 12 months ended September, 75 companies discontinued their programmes, the highest number in the past 10 years, Hamaguchi said.

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Part of the reason for the recent revival may be that some companies want to increase the ranks of retail investors to help meet the bourse's new liquidity standards set during its market revamp. This comes as Prime Minister Fumio Kishida's New Capitalism plan calls for measures including enticing households to switch from savings to investment.

Still, some investors are less enthusiastic about the practice for its short-term focus and lack of substance. Last year in August, shares of Demae-Can tumbled after the food delivery service provider decided to scrap a shareholder-benefit programme of handing out vouchers.

"If companies can't attract individual investors without a shareholder-benefit programme, it's a problem," said Takahiro Kusakari, chief investment officer at Sawakami Asset Management. BLOOMBERG