LONDON – Investors see the yen as the most overvalued currency in the world, a Bank of America Merrill Lynch survey said Tuesday.
“The views on the yen as a currency are that it is still far too overvalued. So there has been a direct link between views on the currency and in positioning for Japanese equities,” said Manish Kabra, equities strategist at BofA Merrill Lynch Global Research.
“Investors don’t see brighter prospects for Japan as such” due partly to the possibility of a further slowdown in the Chinese economy, he said.
The monthly emerging markets and Asia fund manager survey also found that investors’ preference for Asia remained unchanged, with China, South Korea and Thailand seen as the most attractive countries to invest in.
Meanwhile, investors turned less worrisome about Europe’s debt crisis. A net 5 percent of them have an “underweight” position on eurozone equities, down from a net 18 percent in July.
The marked improvement in confidence in the eurozone can be attributed to European Central Bank President Mario Draghi’s promise to use all of the firepower within the bank’s mandate to defend the euro.
“It seems the ECB has been successful in taking out some pressure in the eurozone seen as tail risk,” Kabra said.
“It is more likely that we will see action from the ECB this year instead of the Federal Reserve. In terms of numbers, eight out of 10 investors see the ECB as taking action this year while five out of 10 investors see the Fed taking some action this year,” Kabra added.
He pointed out that optimism in U.S. equities is the lowest since October, noting increasing uneasiness over the so-called fiscal cliff in the United States.
Clerical duty integration
SMBC Consumer Finance Co. plans to integrate clerical duties at its business footholds in mainland China and Hong Kong in stages into a new wholly owned subsidiary in Shenzhen, sources said Tuesday.
By separating the clerical operations from the business bases, the consumer loan unit of Sumitomo Mitsui Financial Group Inc. aims to allow the footholds to focus on their marketing operations as demand for consumer loan services is expected to grow in China and Hong Kong, the sources said.
The company, renamed from Promise Co. last month, intends to reduce personnel costs by transferring the clerical duties to the new Shenzhen subsidiary, which is set to start operating within this week, the sources added.
Moneylenders in China tend to see clerical costs swell as they are required to set up subsidiaries in each municipality for doing business.
Initially, SMBC Consumer Finance will integrate the local bases’ duties to oversee delinquent loans into the Shenzhen unit. Other operations, including accepting loan applications, will be shifted to the unit later.
The company set up its Hong Kong unit in 1992. In and after 2010, it launched a joint venture in Shenzhen with a local company and a fully owned unit in Shenyang. The company offers uncollateralized loans to consumers through these bases.
The balance of loans at its bases in China, including Hong Kong, stood at some ¥22 billion as of the end of June.