1. Japan fund managers trim stock exposure in June

Japan fund managers trim stock exposure in June

Japanese fund managers marginally cut exposure to stocks in their model portfolios in June, reflecting misplaced hopes shared by many global investors that Britain would vote to stay in the European Union.

By: | Tokyo | Published: June 30, 2016 10:01 AM
Holdings of Japanese stocks were kept flat at 49.0 percent. (Reuters) Holdings of Japanese stocks were kept flat at 49.0 percent. (Reuters)

Japanese fund managers marginally cut exposure to stocks in their model portfolios in June, reflecting misplaced hopes shared by many global investors that Britain would vote to stay in the European Union, according to a Reuters survey.

The survey of six Japan-based fund managers, conducted in the week before the June 23 British referendum, showed respondents on average wanted to allocate 41.9 percent of their portfolios to equities, down from 42.5 percent in May.

The respondents’ exposure to UK stocks in June was 5.5 percent, unchanged from May.

Their holdings of euro zone stocks stood at 9.5 percent in June, also unchanged from the previous month, while they shaved their exposure to North American equities to 26.7 percent from 26.8 percent.

Holdings of Japanese stocks were kept flat at 49.0 percent.

Wrongfooted by British voters opting to quit the EU, investors have heavily sold global stocks and sterling.

MSCI’s gauge of global stocks fell roughly 7 percent in two trading days after the plebiscite, while sterling slumped to a 31-year low and global government bond yields plummeted, many to historic lows.

“The financial markets are likely to remain unstable as the possibility arises of other countries in addition to Britain leaving the EU,” wrote Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

“European stocks are expected to remain weighed down by worsening economic conditions, but U.S. equities could eventually recover thanks to improving corporate earnings. The possibility of intervention to arrest the yen’s appreciation, monetary easing hopes and fiscal stimulus expectations could also help Japanese stocks solidify.”

The dollar fell to 99.00 yen after the British referendum, its weakest since late 2013, before pulling back above 100.00.

The respondents slightly increased their overall bond holdings to 49.7 percent in June from 49.4 percent in May.

They upped their exposure to North American bonds to 29.9 percent from 29.7 percent while reducing UK debt to 3.1 percent from 3.6 percent.

They slightly raised Japanese bond holdings to 42.9 percent from 42.2 percent.

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