Number of Stocks with PBR Below 1.0x Falls Below 500 – 長期投資で年金問題なんて怖くない

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Among the 1,635 stocks comprising the TOPIX index, the number of stocks trading at a Price-to-Book Ratio (PBR) below 1.0x has dropped to 497, falling below the 500 mark.

Given that the figure stood at 556 at the start of the year, this means 59 stocks have “graduated” from the sub-1.0x PBR category over the past nine months.

Although there were only two trading days this week, regional bank stocks accounted for 12 of the top 20 performers among stocks trading below a PBR of 1.0x. Among these banking stocks, The Ehime Bank posted the highest gain at 9.10%, followed by San ju San Financial Group at 7.20%, Tochigi Bank in third place at 7.0%, and The Shikoku Bank in 12th place at 4.40%.

Regional banking groups currently have a high number of stocks trading below a PBR of 1.0x. Banks such as Fukui Bank, Yamagata Bank, Awa Bank, and Miyazaki Bank—which started the year with PBRs around 0.5x—have already surpassed the 1.0x mark. Which bank will graduate next?

Will it be Ehime Bank or San ju San Financial Group? And what lies ahead for Shimizu Bank, currently at the bottom of the list?

Regional bank stocks are certainly ones to watch; banks are expected to see earnings growth driven by rising interest rates.

Will the day come when every stock graduates from the sub-1.0x PBR category?

Rising U.S. interest rates have widened the interest rate differential, making it difficult for the yen to appreciate. High import prices are likely to persist for some time. The Bank of Japan needs to be more proactive in raising interest rates.

・Stocks with PBR Below 1.0x: Ranked by Market Capitalization

Among TOPIX-listed stocks trading below a PBR of 1.0x, Toyota Motor has the largest market capitalization (PBR: 0.95x), followed by Honda Motor (0.55x) and Japan Post Holdings (0.71x).

These are all well-known companies. Such levels are unthinkable by US standards. Since overseas pension funds find it relatively easy to invest in these stocks, I believe the time will come when their PBRs exceed 1.0 as well.

・NT Ratio: Widened from the previous week

The NT ratio expanded from 15.89x to 16.07x.

・SoftBank Group: Issuing $11.1 billion in debt

SoftBank Group—the “Debt King”—has once again moved to issue bonds. SoftBank Group has just issued 1 trillion yen in “70th Series” bonds (4.75% coupon, maturing in 2033). They likely rushed to issue this debt before interest rates rose further. This latest round involves three dollar-denominated issues (maturing in April 2030, April 2032, and April 2034, with coupons of 8.625%, 9.25%, and 9.75% respectively) and two euro-denominated issues (maturing in October 2030 and October 2032, with coupons of 7.125% and 8%).

According to Bloomberg, SoftBank Group’s total debt stands at 14.22 trillion yen, with a weighted average fixed interest rate of 4.51%

and a weighted average maturity of 7.58 years.

Looking at the bond redemption schedule, approximately 2.5 trillion yen in debt is due for repayment in the 2027 fiscal year, so refinancing bonds will likely be issued next fiscal year as well. With interest rates on the rise, the cost of servicing this debt threatens to weigh on the company’s financial performance.

Incidentally, if the 9.25% dollar bond (maturing April 2032) issued this time is swapped into a yen-denominated fixed-rate obligation, the effective rate is approximately 6.31%; for the 9.75% dollar bond (maturing April 2034), it is around 6.89%. Given that the 70th Series bond (maturing in 2033) carries a 4.75% coupon, hedging the dollar bonds into yen appears to offer a higher expected return.

When investing in corporate bonds from highly leveraged companies like SoftBank Group, it is advisable to focus on shorter-term bonds. This is to mitigate the risk of a default scenario similar to that of Unizo.

・Caterpillar-Komatsu Ratio: Contracted to 8.35x

The ratio has contracted due to a sharp surge in Komatsu’s stock price. Komatsu remains a stock with significant future potential.・US Credit: Spreads Widening

Junk bonds are being sold off, causing T-spreads to widen, while investment-grade ETFs are also trending downward. It appears a “flight to quality” is underway in the bond market. Proceed with caution in the stock market!

・India

While foreign investors are exiting, the domestic IPO market is booming. Although the Indian market has room for growth, it remains largely closed to foreign investors. A steady, incremental investment approach (such as a systematic investment plan) is best.

For information on India:

Orion Global Ventures – Orion Global Ventures