[Stock Analysis] Shin-Etsu Chemical (4063): 3 Absolute Reasons Why Overseas Institutional Investors Keep Buying as a 'Core Asset' in the Era of the Nikkei 60,000

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As we enter 2026, a year where the stock market is venturing into uncharted territory with the AI semiconductor bubble and SpaceX IPOs, the foundation for the 'asset formation' we are aiming for is not just volatile emerging stocks. We need an 'unbeatable champion' that serves as the center of gravity for our portfolio.

That is none other than the monster with a market capitalization exceeding 10 trillion yen: Shin-Etsu Chemical (4063). Why do institutional investors keep increasing their holdings in this giant 'even now'? I will explain this through three essential defensive barriers (economic moats).

1. The absolute monopoly of ESG money as indicated by the 'SX Brand 2026' selection

On May 18, 2026, Shin-Etsu Chemical was selected for the latest 'SX (Sustainability Transformation) Brand 2026' announced by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange.

This is not just a stamp of approval as an 'environmentally friendly company.' Overseas pension funds and index funds have strict disciplines stating that they 'can only invest in national policy companies that meet ESG and SX standards.'

With this selection, a powerful supply-demand shield (capital flow) has been completed, through which global 'fiduciary money' automatically flows into Shin-Etsu Chemical. This is why it is always the first choice for buying when the Nikkei index is being pushed upward.

2. Two impregnable walls of 'No. 1 global market share' that no other company can follow

Shin-Etsu Chemical's true strength lies in holding two world-leading products in its hands that operate in completely different economic cycles.

① Semiconductor silicon wafers (over 30% global market share)

Just as Advantest (6857) dominates the world with AI chip testers, Shin-Etsu Chemical is the world leader in the 'foundation (wafer)' for all semiconductors. Whether it is NVIDIA's next-generation AI chip or a semiconductor for a SpaceX satellite, high-tech infrastructure on Earth cannot move a millimeter without the company's wafers.

② Polyvinyl chloride resin (No. 1 global market share / US subsidiary Shintech)

Do not underestimate it as a 'dull material'; PVC, which is essential for residential piping and infrastructure, directly absorbs the recovery of the US housing market (a turning point toward a rate-cut phase). When high-tech is down, value (materials) earns. This perfect portfolio creates an astonishing 'operating profit margin of over 25%,' an abnormally high level of profitability for a chemical manufacturer.

3. Stance

'Overwhelming financial soundness that does not collapse during a recession.'

Shin-Etsu Chemical's equity ratio exceeds 80%, and its liquidity on hand (cash and deposits) is over 1 trillion yen. Rather than just letting this massive cash pile sit idle, as of 2026, it is strategically investing in capital expenditure (Capex) with an eye on national policies for several years ahead, such as 'construction of new factories for next-generation semiconductor materials (EUV photoresists, etc.).'

It has the most beautiful balance sheet among Japanese stocks, with a balance between shareholder returns (consecutive dividend increases) and future investment, so much so that it is unaffected by the pressure from the Tokyo Stock Exchange to 'improve PBR below 1x.'

4. Summary: Shin-Etsu Chemical's position in the investment strategy for the second half of 2026

If stocks with high growth potential like Kudan (4425) or QPS Holdings (464A) are the 'starting point of offense,' Shin-Etsu Chemical is the 'absolute guardian.'

Although the stock price is already at a high level, as long as there is a continuous inflow of funds from overseas institutional investors, any dip (correction phase) where the overall market collapses will be the biggest bonus stage for individual investors.

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