Japan fund managers cut Japanese stocks, lift U.S bond weighting in May: Reuters poll

By Shinichi Saoshiro

TOKYO (Reuters) – Japanese fund managers kept overall allocations to stocks and bonds mostly unchanged in their model portfolios in May while trimming positions in Japanese equities and lifting the weighting of U.S. bonds, a Reuters survey showed.

A survey of seven Japan-based fund managers, conducted between May 18 and 22, found respondents on average wanted to allocate 44.8 percent of their funds to equities, unchanged from April.

Their allocation to bonds dipped to 49.9 percent from 50.6 percent but was still roughly within its 50-52 percent range in the past seven months.

Within equities, fund managers reduced weightings on recent outperformer Japan to 29.6 percent from 38.2 percent. They continued rotating into U.S. and Canadian shares, increasing their weighting to 33.5 percent from 31.1 percent.

The S&P 500 index <.SPX> has risen to record highs but it has only gained 3.1 percent so far this year amid prospects of the Federal Reserve hiking interest rates.

In contrast, Japanese shares <.TOPX> have risen 18 percent on hopes of earnings growth, corporate reforms and shifts into equities by large government funds.

Japanese shares look to continuing drawing support from the weak yen, with the currency hitting a 13-year low against the dollar this week. The dollar has been boosted by Fed rate hike expectations and a sagging euro.

“Negotiations between Greece and the European Union bear constant watching, and with the European Central Bank set to buy more bonds, the euro is expected to face another bear phase,” said Yuichi Kodama, chief economist at Meiji Yasuda Life.

Fund managers also showed a continued preference for U.S. bonds, due to comparatively higher yields. Their weighting on U.S. bonds rose to 41.3 percent from 30.0 percent.

They continued reducing their weighting on euro zone bonds, where yields sank to record lows last month on easing by the European Central Bank, cutting it to 15.8 percent from 23.3 percent.

Allocations to Japanese bonds dipped to 35.3 percent from 38.8 percent.

(Editing by Kim Coghill)