Business / Financial Markets

Japan fund managers add stocks in September, trim bonds

Reuters

Japanese fund managers slightly increased exposure to equities in their model portfolios in September and trimmed their bond holdings after the Federal Reserve refrained from hiking interest rates, underpinning demand for riskier assets, a Reuters survey showed.

The survey of five Japan-based fund managers conducted between Sept. 15 and Sept. 23 showed respondents on average wanted to allocate 37.4 percent of their portfolios to equities, up from 36.4 percent in August, which was the lowest on record stretching back to July 2011.

Poll respondents kept their exposure to North American and Japanese stocks in September unchanged from the previous month at 27.6 percent and 46.4 percent, respectively.

Amid concerns about the health of the European banking sector, they reduced holdings of euro zone equities to 9.4 percent in September from 11 percent in August, while keeping exposure to U.K. stocks unchanged at 7 percent.

They raised holdings of emerging European stocks to 3.8 percent from 2.1 percent.

Emerging markets breathed a sigh of relief this month after the Fed stood pat on monetary policy and projected a less aggressive rate rise trajectory in 2017 and 2018.

MSCI’s emerging Eastern European index was on track to rise 1.7 percent in September, during which it hit a 14-month high. It has gained more than 16 percent so far in 2016, while the MSCI world equity index, which tracks shares in 45 nations, has risen 5.1 during the same period.

Strategists at Barclays said they revised up the growth forecasts of Poland, Hungary and Israel based on second-quarter GDP that was better than expected and also “encouraging” indicators for the third quarter.

The fund managers trimmed their overall bond holdings in September to 57.2 percent from 58.3 percent in August.

They raised their exposure to Japanese bonds to 49 percent from 45.3 percent, while cutting holdings of North American debt to 24.6 percent from 27.6 percent.

Analysts expect Japanese government bonds to draw demand from some domestic investors with the Bank of Japan now aiming to keep the benchmark 10-year bond yield at around zero percent under its yield curve control scheme, which was introduced earlier this month as a part of a policy overhaul.

Japan’s 10-year JGB yield has previously slipped deep below zero percent, prompting many domestic investors to look for better yields elsewhere.