【Risk diversification】 5 Reasons Why You Should Sell Shares of ITOCHU Corporation

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ITOCHU Corporation has been in the news for its earnings growth in recent years, but there are actually some major risks.





Taking these risks into consideration, I recently sold my shares of ITOCHU Corporation.





In this article, I’m going to explain why you should sell your shares of ITOCHU!





If you want to invest while protecting your assets, please read through to the end.

The author has three years of investment experience and has experience in the securities industry.





By reading this article, you’ll learn all you need to know about ITOCHU Corporation’s stock!

Five reasons why you should sell ITOCHU Corporation’s stock

1 Susceptible to China risk

ITOCHU has business and capital tie-ups with CITIC and Charoen Pokphand Group Company Limited.





Both of these companies are susceptible to economic and financial risks due to the fact that they do business very closely with China.





Although we are developing our business by leveraging our strengths in the non-resource sector, the geopolitical risks in China have been increasing in recent years.





Therefore, we cannot deny the possibility that our business performance may be affected by our partnerships.

2 Susceptibility to Korea risk

ITOCHU has an affiliate company, Descente, a Japanese sportswear manufacturer.





As a fresh memory, DESCENTE has been affected by the boycott of its Korean business.





I believe that these effects are related to ITOCHU in no small degree, and there will be business losses.





Like China, South Korea is a place with high geopolitical risk, so I think it will be related to our business performance.

3 Little scope for dividend increases

By 2021, ITOCHU has recorded six consecutive fiscal years of dividend increases, and its dividend payout ratio is in the 30% range, which is excellent.





However, the range of dividend increases is small when compared to other companies in the same industry.





Also, the dividend is small, so I think we should wait and see after future dividend increases.

4 Issues with Family Mart sales

Itochu acquired Family Mart shares through TOB in August of 2020.





This put Family Mart under the full-fledged control of Itochu.





It was thought that by delisting its shares, it would be able to enter a system where it would consider its respective merchants and customers.





However, in reality, the convenience store business conducted by a trading company is said to be one of the insurance policies to secure profits and is performance oriented.





In addition, Family Mart is lagging behind among Japanese convenience stores, so there is an urgent need for improvement in the future.

5 Bias toward overseas business

Overseas bases of general trading companies are evenly distributed, but ITOCHU is unevenly distributed.





It may be due to capital tie-ups, but we have more than 10 affiliates in China.





In fact, in 2018, a Japanese national was charged with espionage in China and was sentenced to three years in prison.





Therefore, as mentioned earlier, geopolitical risk is an unavoidable issue.

What are the external risks that affect the entire trading industry?

1 Climate risk

As a Shosha doing business across the globe, we are also susceptible to the effects of the global climate.





For example, we have transactions with food companies and operations in resources and energy, so such risks are unavoidable.





Since these issues are unpredictable, many companies are taking measures to deal with them.

2 Economic risks

Each country has a different economic climate, so when times are bad, you will be affected.





Some companies diversify their risk by doing business with many countries.





However, it is important to note that a recession in an influential country can spread to the entire world.

3 Foreign exchange risk

Currency risk is directly related to the economy and business climate.





Traders around the world often trade with economic forecasts in mind, and this has a bearing on the overseas earnings of trading companies.





As a result, currency risk is likely to be greater in times of recession.

Conclusion

There you have it, five reasons why I sold my shares of Itochu!





Investing is your own responsibility. Make your own final decision after referring to various opinions.





I will continue to provide useful information on investing, so please stay tuned.





Thank you for reading to the end!