China, Japan Rift Seen As Likely Temporary
Anti-Japanese protests in China were downplayed by some Asia fund managers Tuesday, who said tensions were likely to blow over in a few weeks with little impact upon the share prices of major Tokyo-listed brands with mainland operations.
RBC Asset Management fund manager Yoji Takeda said he wasn’t concerned about a lasting impact to Japanese companies who rely upon China for a growing share of their sales.
Takeda said that history has tended to show a pattern of flare ups between the two nations that then abates in about a month. “I’m not that pessimistic about the situation,” he said.
China and Japan have seen improving ties and growing trade, with China ranking as Japan’s largest single trading partner.
“Economically, these two countries are closely integrated,” Takeda said.
Over the weekend huge anti-Japanese protests swept across dozens of mainland Chinese cities, forcing companies such as Panasonic 6752 PC, Canon Inc. 7751CAJ, and Lion Corp. 4912 LIOPY to halt production at some of their mainland facilities. Read more on production stoppages
Further anti-Japanese demonstrations took place on Tuesday, the anniversary of the Mukden Incident, which Japan used as a pretext for its 1931 invasion of the northern part of China known as Manchuria, according to reports.
Meanwhile, Jefferies analysts also weighed in Tuesday with the view that the escalating crisis would eventually fade into insignificance.
Historically, these rifts have been “short-lived with limited impact,” the Jefferies analysts said.
The broker said Chinese airlines currently suffering from a surge in cancellations of mainland tours to Japan are likely set for a fast rebound for what ranks as their most profitable international route when tensions ease.
Fitch Ratings, however, struck a more cautious tone in a research note Tuesday.
It warned that a further escalation of the tension could negatively impact the credit ratings for major Japanese automotive and technology companies.
It also said that sales of big Japanese companies could suffer in the short term. “There is little visibility on the extent to which their sales in China might be affected, and how long anti-Japanese protests may continue,” Fitch added.
Fitch said Sharp Corp. 6753 SHCAF and Nissan Motor Co. 7201 NSANY had the highest sales exposure to China among the Japanese companies it covers.
Nissan shares fell 5% on Tuesday while Sharp shares lost 2.4%. See Asia Markets.
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