A hostile bid by an American-based investment fund to take over two Japanese firms could unlock the door to a market previously closed to foreign investors, a hedge fund conference was told last weekend.
In what has been described as a very rare move by a foreign fund, US-based Steel Partners Japan Strategic Fund in December launched bids for textile firm Sotoh, and industrial unit Yushiro Chemical Industry.
Whilst the latter firm has announced that it will reject all bids, whether from domestic or foreign sources, fund managers believe it could be the start of a major wave of interest in Japanese equities.
"A bomb has gone off in the Japanese market and the ripple effect will be felt for years to come," observed James Rosenwald, a partner in Los Angeles-based hedge fund Dalton Investments, at the New York conference.
"In small and medium-size companies in Japan, there are some wonderful gems that we are trying to find and work on investing in them," he added.
The Japanese equities market has been notoriously insular in recent years, and over 95% of equities are owned by Japanese investors.
Steel Partners is currently facing a rival bid for Sotoh from Japanese venture capital firm NIF Ventures Co.
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