Amadeusz Juskowiak

Economic spotlight japan eyeing foreign stocks

Japanese life insurers trust banks and corporations largely responsible for vitalising the US Bond market in recent years are now eyeing stockmarkets in the US Britain France and Hong Kong fund managers said

After concentrating on US Treasury bonds for years Japanese institutions now see a risk in relying too much on similar types of investments they said

Japans net buying in overseas stockmarkets this year may double or triple to 1520 billion dlrs from seven billion in 1986 Shigeki Matsumoto of Nikko Securities Co Ltd said

Matsumoto who manages Nikkos investment research and strategy said there is evidence Japanese investors began poking around in foreign stockmarkets around July last year but few made firm commitments until December when net purchases suddenly grew to 15 billion dlrs from around 500 mln in each of the previous five months

Net buying in 1985 totalled only 995 mln dlrs he added

This sudden penchent for overseas stocks is likely to draw the widest smiles from Wall Street because about 70 to 80 pct of funds will be invested in the US Markets Matsumoto said

The trend has been to head toward the US Market first because of its size and next because it has been successful over the last couple of years said Eugene Atkinson managing director of Goldman Sachs International Corp

Wall Streets massive turnover offers good liquidity enabling institutions to easily move large volumes of money in and out of shares with the minimum of risk he added

However few see holdings in US Treasuries dwindling They will remain a Japanese mainstay fund managers said

Institutions particularly life insurance companies which concentrate on income rather than capital gains to cover payouts to policy holders are unlikely to sell their US Treasuries but will put in less money said Shinichi Kobuse manager of Yamaichi Securities Co Ltds international fixed income activities

There has been some selling of US Bonds by shortterm investors but the selling is unlikely to amount to a significant chunk of Japanese bond holdings because the liquidity of the US Bond market remains attractive he added

Kobuse said investment managers are bullish on the US Equity markets despite predictions by economists the US Economy will remain sluggish over the next couple of months

Interest in Wall Street has been spurred by recent reports of significant growth in earnings by major US Corporations he added

Yutaka Hashimoto general manager of Nippon Life Insurance Co told an economic conference that insurance companies which are responsible for 26 pct of Japanese funds in foreign securities hold a lopsided proportion of US Treasuries and intend to diversify into other instruments and currencies

Insurance companies have put the dominant portion of their funds into the US But will now invest in Britain West Germany France and other countries Hashimoto said

Lower interest rates worldwide make the returns on stocks relatively high in comparison with bonds and in light of the strength in the yen the growth in stock values is expected to offset currency risks he added

One trust bank official said his bank aims for a 10 pct annual return on overseas investments but the recent decline in US 30year bond yields has caused a rethink in pension fund investment stategies

The bank is looking more at US Equities and European bonds he said

Japanese investments in British equities have already turned active and the pace is likely to increase said Andrew Sheaf general manager of international equity activities at County Securities Japan

Last week was the busiest week we had he said

Investments are being spurred by the growth in profits of British companies and the recent deregulation of government controlled firms fund managers said

Deregulation in France is also attracting Japanese interest but stock investments there will be inhibited by worries about the French franc they said

Investments in Hong Kong will be mostly shortterm and speculative due to uncertainty about the colonys longterm political stability they added

Japanese investors are cautious about West Germany particularly as German firms like their Japanese counterparts are concerned about the recent dollar fall

Australia also poses some risks due to currency values they added