Stock Split to Help Mitsubishi UFJ Shares?

Mitsubishi UFJ Financial Group (MTU) (JP: 8306) shareholders got a double whammy on Friday. Japan's largest bank said it will split its shares (1,000:1), which is good news, but its ordinary shares will not trade again until next week (Oct.1), while paper certificates are accounted for, which pushed its shares down 3.8% to ¥1.01 million ($8.78 at ¥115/$1), touching ¥1m intra-day.

Secondly, Mitsubishi UFJ said it may have to reduce the value of its securities holdings due to sub prime-induced losses. The combination of news sent MUFG's ADRs down 6.7% to $8.32 on Friday.

Last week I voiced my doubt about MUFG and rival Japanese mega banks as investments in "Japan's Mega Banks Beaten Down, But It's Not Time to Buy." My stance has not changed.

The possible revaluation of MUFG's holdings to the downside is an obvious negative -- S&P downgraded it to "sell" from "hold" on the news.

The matter of the stock split, is in fact positive, because it takes a 1 million yen/share stock to 1,000 yen/share, making it more accessible to investors, also meaning more liquidity.

That MUFG's ordinary shares won't trade the entire week is bothersome (remember the market was closed today for a holiday). At least its ADRs can still be traded. I would expect MTU to trade lower this week, maybe flat if lucky by week's end in anticipation of buyers on the reduced purchase price (100 shares x 1,000 yen, as opposed to 1 million yen).

The only way I would consider being a buyer here is if there's is a big move to the downside, say above 5% but ideally closer to 10%. Despite the stock trading at a 52-week low and its price-to-book value coming down, I'm not convinced it's a buy yet.

Disclosure: The author does not own shares of any companies mentioned in this article.