The Foreign Exchange and Foreign Trade Act requires some foreign investors to report in advance when they plan to buy a more than 1% stake in the designated firms, versus a previous threshold of 10%.
The law came into force on Friday with full implementation set to begin on June 7 after a 30-day transition period. The market impact of the legislation is"relatively limited” despite the list making up around 40% of the market capitalization of the Topix, Goldman Sachs’ Kathy Matsui, Hiromi Suzuki and Kazunori Tatebe wrote in a report.
"China will have been on their minds” in drafting this legislation, said Yuki Kanemoto, senior researcher at Daiwa Institute of Research."But most sovereign wealth funds are likely to be independent of their governments.” Fumio Matsumoto, chief strategist at Okasan Securities Co., says while electronic and precision makers were expected to be on the list,"there was more small-and-mid cap stocks on the list than expected, and it’s hard to see the reason why they are there.”