Sompo Japan Insurance Co., part of the nation's third-largest casualty insurer, will focus its investments on emerging Asian markets this fiscal year, reducing holdings of Japanese stocks.
"We're bullish on Asia," said Makoto Hatta, head of fixed income in the global investments department at the insurer. "We will allocate proceeds from the sale of strategic cross-shareholdings in Japan to invest primarily in Asian emerging-market currencies, bonds and stocks."
In debt, the company will select Asian government bonds based on yield curves, while in equities Sompo will focus on the Chinese market, Hatta said. In the wake of the global financial crisis, it's too early to invest in high-risk securitized products and equities in other regions, he said.
Sompo Japan and Nipponkoa Insurance Co. merged to create NKSJ Holdings Inc. on April 1. Sompo Japan had ¥4.86 trillion in assets under management as of March 31.
The currencies of Asia's emerging markets are the strongest in the world, after the yen, dollar and euro, Hatta said. The dollar may weaken as the Fed holds off raising interest rates and will likely range between the high ¥80s and below ¥100 this fiscal year, he said.
Still, if the yield differential between Japan and the U.S. widens, the dollar may strengthen, Hatta said. U.S. Treasury yields may rise above 4.5 percent, while gains in Japan's long-term rates will be limited, except for a seasonal increase between April and June, he said.
"Japan's yields will remain range-bound," he said.
Hatta said he is skeptical about Europe's economies, because there is "distortion" arising from using a single currency in different countries. "We're bearish on the euro," he said.