Japanese Investors Flocks Over Foreign Stocks, Bonds

According to Nikkei, Japanese retail and institutional investors have begun snapping up foreign stocks and debt securities, especially those in emerging economies, on growing expectations of an early economic recovery.

Domestic investors were net buyers of foreign securities for the first six months of the year to the tune of 14.47 trillion yen. Investment trusts created by Japanese financial institutions for public subscription held a combined 25.69 trillion yen in foreign stocks and bonds at the end of June. Behind the increase was active investment in assets in emerging economies and higher-yielding currencies, as well as rebounds in foreign stock prices, which boosted existing asset values. Of the 25.69 trillion yen in overseas holdings, 32.3% was held in dollars. The ratio of assets owned in Australian dollars rose to 12.1% while holdings in Brazilian real estate increased to 3.8%. The Global Sovereign Open fund, which has 4.47 trillion yen in assets under management, invest primarily in bonds issued by the US and major European government. However, Kokusai Asset Management Co., which manages the fund, recently decided to add debt securities issued by Portugal and Greece to the fund's portfolio because the bonds yield more that its existing holdings.

Japanese banks and insurance companies are also boosting investment in foreign stocks and bonds as the global financial markets regain stability. Daido Life Insurance Co., for example, is expanding investment in unlisted shares to 180 billion yen from the current 128.3 billion yen, a company official said. At present, it has poured about 114 billion yen into unlisted overseas shares. Norinchukin Bank, the central bank for agricultural and fisher cooperatives, has increased its weighting in foreign bonds, which yield more than Japanese government and corporate bonds.