To unlock shareholder value, Singapore conglomerates can learn from Japan’s trading houses

SINCE 2020, Japan’s stock market has experienced a remarkable revival. The Nikkei 225 index surpassed the 70,000 threshold in June 2026, marking a further acceleration in its gains over recent years.

The rally has had several drivers. Front and centre has been the global artificial intelligence boom, which has lifted technology-related names such as Tokyo Electron and SoftBank. Supporting this trend is the weak yen, which has attracted global capital flows to Japan.

A highly visible turning point also came in August 2020, when Warren Buffett’s Berkshire Hathaway disclosed stakes in five major Japanese trading houses, known as the sogo shosha.

The investment reflected Berkshire Hathaway’s confidence in undervalued, cash-generating businesses.

It served as a powerful signal to global investors to re-evaluate what Japanese corporates had to offer.

However, beneath these well-known market drivers, one structural change has also been important: the transformation of how Japanese companies, especially conglomerates, manage their portfolios and allocate capital.

For Singapore companies seeking to address persistent valuation discounts, Japan’s experience offers a useful reference point: shed legacy assets, improve capital allocation and show investors how the businesses that remain are synergistic with each other.

From conglomerate discount to premium

Historically, diversified Japanese groups, much like many legacy conglomerates listed on the Singapore Exchange (SGX), have suffered from a persistent “conglomerate discount”.

Investors penalised these companies for their complex structures, capital inefficiency and lack of focus.

Japan’s Hitachi offers one of the clearest examples of how that discount can be reversed.

By 2021, the company had substantially reshaped its portfolio, including the businesses once known as the “Hitachi Sanke” – Hitachi Metals, Hitachi Chemical and Hitachi Cable. This included the sale of Hitachi Chemical and the decision to sell Hitachi Metals in a deal valued at roughly 817 billion yen (US$5.3 billion).

What made this restructuring more than a series of asset disposals was the company’s strategic pivot to Lumada – Hitachi’s digital platform concept for turning information technology and operational data into customer value.

Lumada became central to Hitachi’s portfolio strategy: Businesses that strengthened its digital-led enterprises were reinforced, including through the planned integration of its acquired subsidiary GlobalLogic with Hitachi Digital Services, while non-core businesses were progressively divested.

This direction was reinforced by the Tokyo Stock Exchange’s push for capital-efficient management, most notably its call for listed companies to disclose initiatives addressing their cost of capital and stock price.

Investors rewarded Hitachi’s moves. Shares of the company jumped nearly 300 per cent between September 2021 and 2026, outperforming the Nikkei 225’s 110 per cent gain.

Criteria-driven restructuring consequently gained further momentum across corporate Japan.

Hitachi’s example also shows that reshuffling a portfolio only gets a conglomerate halfway there. The remaining businesses must also generate more returns than they would separately.

That requires a second capability, harder to build than a clean balance sheet: the ability to make a diversified group function as more than the sum of its parts.

Proving the strategic fit

Portfolio restructuring alone is not enough. For a conglomerate to command a premium, the businesses that remain must have a clear reason to belong together and must draw upon each other’s strengths.

Investors need to see not only which businesses have been retained, but also how common capabilities, customer relationships, technology, capital and market access allow them to create more value together than they could separately.

Japan’s trading houses provide one model. Their advantage is not diversification itself, but a combination of key businesses that combine local market knowledge with group-wide networks, capital and sector expertise across multiple businesses and geographies.

A different but complementary model can be seen in how Marubeni, one of Japan’s largest conglomerates, created an investment platform designed to drive the company’s consumer business.

Known as the Marubeni Consumer Platform, it illustrates how a corporate group can combine locally embedded investment teams with the broader assets of the parent company, rather than just representing a conventional conglomerate restructuring.

Operating across India, the US, South-east Asia and Japan, its regional investment platforms combine local investment expertise with Marubeni’s group-wide network, capital and sector knowledge while maintaining the speed and market proximity of local teams.

The Marubeni stock is now worth five times what it was in 2021.

The value lies not in diversification alone, but also in connecting local opportunities with the parent company’s broader capabilities.

What this means for SGX corporates

For SGX-listed companies, most particularly diversified corporates such as Jardine Matheson, Keppel and Sembcorp Industries, elements of the Japanese playbook are highly relevant, particularly against the backdrop of persistent valuation discounts in the Singapore market.

One message from Tokyo is that market valuations reflect macroeconomic conditions, but can also be shaped by governance and strategic clarity.

For SGX-listed conglomerates, the challenge is therefore not simply to become more focused, but also to demonstrate how their portfolio creates synergies that justify keeping those businesses together.

Having advised several Asean conglomerates going through similar transitions, I have seen that digital investment and portfolio discipline are often treated as separate workstreams, even though the two are closely linked.

As the experience of leading Japanese corporates has shown, realising a conglomerate premium demands sustained execution: clear strategic vision, rigorous capital allocation and portfolio restructuring and attention to the operational details on the ground.

For Singapore companies, the next step is to translate high-level strategy into action domestically and in other priority markets.

Companies that bridge governance reform with strong regional execution will be better positioned to create sustainable growth and unlock shareholder value.

The writer is CEO of IGPI Singapore and a partner of the IGPI Group