To our shareholders and customers:
Last year was an extremely tough year hit by the economic crisis to the extent that it is called once-in-a-century event. This year, we may have to realize that it was just the opening scene. You may say don’t start with such a pessimistic view at the beginning, however this year may turn out to be a hopeful year of once-in-a-century depending on how you look at it.
First of all, hopes can only rise just by experiencing despair and that is supported by a pride. “Once-in-a-century recession” will negatively affect the Japanese economy and put it in the most serious situation in the world. The history proves that, in any country or in any corporation, no matter how excellent its people or employees are, if the leader is not smart and focused on a range of efforts that are completely meaningless, it will quickly fall to the very bottom. It is an illusion to believe that things will work out if you rely on the government or corporation. Therefore, “Do not rely on” is all the starts. In order to challenge with pride and hope throughout the year, it is important to keep our presence of mind to investigate what is the cause of event that may be despair. Then you need to keep your pride and should come up with your own solutions to put into practice with a hope that you can definitely overcome without relying on other people.
I assume that the Japanese equity market will be in a miserable situation this year. I’m not talking about the level of stock price, but rather I’m concerned that the Japanese equity market may fail to function properly. The stock price will erratically fluctuate because of extremely poor liquidity at the market. I just hope that “short-selling regulations” imposed by the Japanese government last year is not a possible cause for it. If the regulations were intended as a Price Keeping Operation(PKO) to raise stock prices, it is too silly for words. Every market participants know that without sellers there will be no buyers either. Restrictions on the liquidity, which is the lifeline for the market, would only be negative for investors’ sentiment and drop down liquidity even further.
A lack of market liquidity has been obvious since the end of last year. Foreign investors have historically been the major players in Japanese equity market in terms of trading value, but it is no more realistic to expect their significant presence in terms of providing liquidity. Then retail investors may be the last hope, but equity trading value and margin balance of our customers have been significantly declining since last August. Retail investors suffered badly in this market downturn last year. Some media reports that “retail investors are net purchasers” simply by subtracting selling from buying, but retail investors have not yet started fully participating in the equity market. If these media know that day-traders generate the large part of retail equity trading value, they would have reported differently. In fact, retail investors increasingly shy away from the equity market at a pace much higher than expected.
Matsui Securities has maintained its profitability even under such circumstances, but if the equity trading value at Tokyo Stock Exchange remains constantly below 500 billion yen per day like the end of last year, we could be below break-even level. Since last year, I have been telling over and over again to our employees to be prepared for the worst case that such bad situation may continue for quite a while. Fortunately, we have been emphasizing the selection and concentration of businesses based upon the company’s motto since our foundation 90 years ago: It takes throughout life to accumulate wealth but it could be spent over night. And then we are committed to the principle of doing our best to reduce break-even levels without dealing with anything apart from the core business. We have accumulated net assets over the last 90 years, but we are bracing ourselves in case of the crisis since our foundation which ranks second when we lost all the property by the World War II.
The buds of our present hope are Real Time Gross Settlement (RTGS) and CME Nikkei 225 futures trading. We believe that facilitating real time settlement of equity transactions is an innovative initiative, but expansion of the liquidity at the RTGS is the present serious issue. Therefore, we plan to make every possible effort to start dealing with margin transactions which, we believe, could generate a large portion of liquidity. While the dealing of CME Nikkei 225 futures was increasing immediately after the service was launched in last June, we were forced to temporary suspend the service in the wake of the failure of Lehman Brothers that was the intermediary broker for the service. Our efforts are currently underway to resume the service.
Matsui Securities has been through a number of reforms since its foundation in 1918. During the era of Matsui Fusakichi Shoten run by the founder Fusakichi Matsui, the company terminated its operations in 30 years after losing all its property by the World War II. Takeshi Matsui, the successor who took over the business after the war, worked hard for 40 years to transform a family-run business into a regulated securities company. Although the Matsui could not step out of the category of small securities firms, the Matsui had been committed to maintain full independence in the middle of consolidation of the securities industry and had operated the company based upon steadily management practice. It has been 20 years since I, as a husband of Takeshi Matsui’s daughter, took over the current position when the company celebrated its 70th anniversary. We replaced the then existing sales and marketing forces with the operators at the call center and began full-fledged online trading services. We also achieved a listing on the first section of the Tokyo Stock Exchange. During this period, the equity trading value of our customers has grown more than two hundred fold from 150 billion yen to 35 trillion yen a year (at the peak in FY2005) and our profits also increased dozens of times to 37 billion yen (ordinary income in FY2005).
All of these achievements are the source of my pride as the top management. I’m not just indulging myself in nostalgia. Because I myself know very well that we achieved those without much of efforts. My reform is only half way through. I do not intend to be content with such small dreams and hopes we have achieved. I believe that a “once-in-a-century recession” will be a golden opportunity for a “revolutionary change in a century” or a “hope of a once-in-a-century event.” Matsui Securities has a gene for “CHANGE” formed over its 90-year history. Our past leaders had different principles but Matsui’s gene remains unchanged: “Flexibly accommodating to the changing times. Change is just the management itself.” I wish to make this year a year of revolutionary change.
President & CEO
Matsui Securities Co.,Ltd.