Capital Injection Into Firm Cheers Japan Market

Source : The Business Times, August 26, 2008

(TOKYO) Shares of midsized Japanese property firms jumped yesterday after real estate company Zecs Co said it would receive a capital injection from an investment fund, sparking hopes of further inflows to help the beaten-down sector.

The industry has seen a string of failures recently as banks tighten credit to small and medium-sized developers, which are struggling amid soaring costs and weak sales of apartments as the world's second-largest economy slows.

Zecs shares closed up 14 per cent at 8,160 yen after it said it would sell about 1.5 billion yen (S$19.4 million) worth of its preferred shares to Japanese fund J-Will Partners by the end of this month.

But even after yesterday's gain, Zecs shares are down about 90 per cent over the past three months.

'It's probably about time investors come to property firms through actions like capital injections, with the mid- to long-term view that their shares have plunged too far and may have nearly bottomed,' said Hitoshi Yamamoto, chief executive of Fortis Asset Management Japan.

'Still, a rebound (in property shares) won't happen overnight and financial institutions are not likely to change their stance.'

Among similar stocks, apartment developer Joint Co shot up 13.3 per cent to 256 yen, while Creed Corp surged 11.7 per cent to 113,900 yen.

The Tokyo Stock Exchange's real estate sector index rose 2.1 per cent, outperforming a 1.7 per cent rise for the benchmark Nikkei average although it is still down 21 per cent for the year to date.

The Tokyo bourse's Reit index added 1.9 per cent but remains down 33 per cent for the year to date.

Investors had dumped the sector in the wake of developer Urban Corp's failure this month, the biggest collapse of a listed Japanese company in six years, and the failures before that of fellow developers Suruga Corp and Zephyr Co.

The sector's troubles have also spurred moves to consolidate with apartment developers Azel and Gro-Bels announcing last week that they would merge in January to better compete amid high construction materials prices and sluggish demand. -- Reuters