Japanese public institutions lead foreign share buying at record pace

[TOKYO] Japanese investors bought a record amount of foreign shares in January in a sign that public institutional investors, including Japan's US$1.1 trillion mammoth pension fund, are heeding Prime Minister Shinzo Abe's call to chase higher-yielding assets.

Japanese institutional investors purchased 1.619 trillion yen (US$13.63 billion) of foreign stocks last month, data released on Monday by the Ministry of Finance showed. Of that, mutual funds, which oversee the assets of some public investors through the various public funds that they manage, bought 695 billion yen - a monthly record. Net purchases by trust bank accounts hit a six-year high of 716 billion yen. Trust banks manage a big part of the Government Pension Investment Fund's (GPIF) investments, which are closely watched by global markets.

Prime Minister Shinzo Abe has urged the GPIF, the world's biggest public pension fund, to seek higher returns on riskier assets as Japan's fast-ageing population means benefit payouts by GPIF will increasingly outweigh fund contributions. In October, the GPIF said it would boost its allocation on foreign stocks to around 25 per cent from 12 per cent and cut the weighting of low-yielding Japanese government bonds.

However, private institutional investors appear to be more cautious about foreign shares. For instance, while Japanese life insurers were net buyers of foreign stocks in six of the past seven months, the net increase is small - at 200 billion yen between July and January.

Many Japanese investors, still risk-averse at heart, are wary of a pullback in foreign shares from current prices. In January, the S&P 500 index traded just under an all-time high hit in December, while the pan-European stock index is at a seven-year peak.

"Few domestic institutional investors are buying foreign stocks at the current high levels,"said Tetsuro Ii, president of Commons Asset Management in Tokyo.

REUTERS