* Investment ideas go beyond obvious baby goods makers -
* Japanese education services providers may see demand in
China - fund manager
* Effects may not take place until 2015 - Nomura
By Ayai Tomisawa
TOKYO, Dec 4 Investors in Japanese stocks are
making long-term bets on companies that seem well-placed to
benefit from China's plans to relax its one-child policy, with
musical instrument makers, toy manufacturers and food companies
among their favoured picks.
China unveiled sweeping social and economic reforms last
month that are aimed at increasing productivity and transforming
China's export-based economy into a consumption and
Beijing's boldest set of reforms in three decades will
create many long-term opportunities, particularly for China's
biggest trading partner, Japan.
The relaxation of the one-child policy was the most
eye-catching reform, and investors' focus inevitably fell on
obvious plays such as baby goods makers like Pigeon Corp
, whose shares jumped on the news, and have gained more
than 140 percent this year.
But, Pigeon is trading at a relatively high valuation of 5.6
times its book value, said Drew Edwards, managing director at
Advisory Research Investment Management.
The same goes for disposal diaper maker Unicharm Corp
, whose shares surged 4.2 percent on the first trading
day after the announcement and has gained 44 percent in the
Edwards reckoned investors were probably overestimating how
much some Japanese companies, like producers of maternity
products, baby goods and diapers, stood to prosper from the
relaxation of China's one-child policy.
"On the other hand, the market is probably ignoring the
likely benefit to less obvious beneficiaries of the policy
reform," he said.
Edwards is optimistic about Yamaha Corp, which
sells many musical instruments in China, where many parents
encourage their children to learn how to play an instrument at a
Last fiscal year, Asian markets, mainly China, generated
more than 80 percent of Yamaha's operating profit, but despite
this positive trend, Yamaha still trades at attractive levels --
1.2 times its book value, Edwards said.
His other recommendations included companies that own
intellectual property rights such as video game maker Namco
Bandai Holdings, due to the popularity of Japanese
cartoon characters in China.
Hokuto Corp is another company in his portfolio. It
sells high quality food through a secure supply chain to Chinese
families, as recent scandals in China have heightened demand.
China is already a large export market for Japanese
producers of goods such as autos, electronics appliances and
toiletries, but many services could also benefit from the
expected increase in population, investors said.
"If the working population grows, not only products but also
services can tap into the market," said Makoto Kikuchi, the
chief executive of Myojo Asset Management.
He said that education services providers, such as those
that offer courses online or by mail, may also find growth
opportunities in China.
Kikuchi said Benesse Holdings Inc and Justsystem
Corp, which have a domestic Japanese focus now, may
have opportunities in China in the future.
But some said investors were still cautious because there
were few details as to how or when the new policies would be
China relaxing its one-child policy is positive for
sentiment, but fundamentals are unlikely to be affected until
2015 at the earliest because the working-age population will not
be evident until then, Nomura said in a report.
There are other reasons to be cautious, given the heightened
tensions between Tokyo and Beijing over disputed islands in the
East China Sea.
But, investors appear confident that economic interests will
stop the dispute getting out of hand. Japanese shares have shown
scant reaction to the row in recent weeks, but when the issue
erupted in September last year, Japanese companies, particularly
automakers, suffered a sharp drop in sales to China.
(Editing by Simon Cameron-Moore)