TOKYO - The likely $15.5 billion share issuance by Mitsubishi UFJ Financial Group and Hitachi Ltd is the latest blow to Japan's long-suffering investors, but it won't be the last.

Japanese companies have already raised $40 billion through issuing common stock and convertible bonds this year, tapping a modest share market rebound for much-needed cash after the financial crisis -- but at the same time heavily diluting the holdings of their current shareholders.

The fundraising, mainly from financial firms but including technology, industrial and real estate companies, has put pressure on stock prices across the board and sparked investor concern about more share sales to come.

This is the biggest factor why Japanese shares lag behind U.S. and European shares, said Takeshi Osawa, senior fund manager at Norinchukin Zenkyoren Asset Management, referring to the fundraising rush.

It's going to stay that way if we keep seeing these new share issues that suck several hundred billions of yen out of the market each time.

Japan's benchmark Nikkei 225 .N225 has risen only 10 percent this year, making it the worst performing stock market among the Group of Seven major industrial nations.

The U.S. Dow Jones Industrial Average .DJI has gained 16 percent, while Britain's FTSE 100 .FTSE is up 19 percent.

Hitachi, Japan's biggest electronics firm by sales, said on Monday it will raise up to 416 billion yen in a share sale, after fees. Shares of Hitachi made their biggest one-day slide in six months after sources told Reuters about the public issue, the company's first in 27 years.


Hitachi and others are looking to issue shares now out of fear of a market downturn in the near future, said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

The outlook is uncertain. If they don't raise funds now they could have a tough time doing so in the future, he said.

Japan's economy grew 1.2 percent in the third quarter, the fastest pace in more than two years, but that was partly due to government stimulus. The better-than-expected economic growth also failed to mask signs of weakness in private consumption and factory output.

Mitsubishi UFJ, Japan's top bank, is likely to raise as much as 1 trillion yen ($11.2 billion) by the end of the year to meet stricter global capital regulations and increase lending in Asia, three sources said on Saturday.

The fundraising would be a record for a Japanese financial firm, and Japan's biggest in 9 years, according to Thomson Reuters data.

Shares of Mitsubishi UFJ slid 5.5 percent on Monday. Smaller rivals Mizuho Financial Group and Sumitomo Mitsui Financial Group, both of which are less capitalizedthan Mitsubishi UFJ, also fell. Mizuho dropped 3.9 percent and Sumitomo Mitsui 5.9 percent.

While it's difficult to tell which companies will need to raise money next, Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, reckons there are a few points to look for.

Obvious candidates are companies that need to repair their balance sheets after the financial crisis and the attendant stock market slide, he said.

Major auto makers such as Toyota Motor Corp and Honda Motor Co, as well as food companies and drug makers, are unlikely, Ogawa said, citing their relatively strong balance sheets.

Companies that have little opportunity for long-term growth, such as construction firms tied to the shrinking domestic economy, are unlikely to be able to raise funds.

It's companies where the balance sheet is bad, but they still have a bit of a growth story, he said, noting that chemical makers and other resource companies are likely bets.

Major Japanese chemical companies include Shin-Etsu Chemical and Asahi Kasei Corp.

But at least one thing is certain -- investors are the ones feeling the biggest pinch.

I'm angry, said Daiwa's Ogawa. The world of investing isn't a charity.

($1=89.60 Yen)

(Additional reporting by Kiyoshi Takenaka and Mayumi Negishi; Editing by Rodney Joyce and Ian Geoghegan)