13 Jul 2015
Japanese pension fund activity quietly supports Japanese stocks, USD/JPY - DB
FXStreet (Mumbai) - Taisuke Tanaka, Strategist at Deutsche Bank believes, Japanese pension fund activity quietly supports Japanese stocks as well as USD/JPY.
Key Quotes:
“GPIF's results for FY3/15 reveal the following asset breakdown: domestic bonds ¥56.7trn or 39.4% of the total (last December: 43.1%), domestic stocks ¥31.7trn, 22.0% (19.8%), overseas bonds ¥18.2trn, 12.6% (13.1%), and overseas stocks ¥30.1trn-plus, 20.9% (19.6%). Its balance rose in all risk assets, but its foreign bond weighting was down slightly.”
“GPIF revised its basic allocation last October to the following: domestic bonds 35±10%, domestic stocks 25±9%, overseas bonds 15±4%, and domestic stocks 25±8%.”
“That said, all assets are within their permissible ranges of deviation. This suggests that the GPIF does not necessarily have to pursue Japanese stock or foreign securities upward and can instead wait to buy on dips.”
“We see no cause for worry if Japanese pensions do not buy when the USD/JPY is rising. They should continue to support the markets with a buy-on-dip stance. “
“Meanwhile, other mutual aid associations and pensions, which have total assets of over ¥50trn, are still acquiring Japanese stocks and foreign securities to align themselves with GPIF's basic allocation ratios.”
“We believe the pace of foreign securities purchasing at both GPIF and other mutual aid associations and pensions will peak in 1H FY3/16 (Apr-Sep). As this should coincide with US data releases and the Fed's rate hike steps, we expect the USD/JPY to track in the ¥125-130 range from late this year through 2016.”
Key Quotes:
“GPIF's results for FY3/15 reveal the following asset breakdown: domestic bonds ¥56.7trn or 39.4% of the total (last December: 43.1%), domestic stocks ¥31.7trn, 22.0% (19.8%), overseas bonds ¥18.2trn, 12.6% (13.1%), and overseas stocks ¥30.1trn-plus, 20.9% (19.6%). Its balance rose in all risk assets, but its foreign bond weighting was down slightly.”
“GPIF revised its basic allocation last October to the following: domestic bonds 35±10%, domestic stocks 25±9%, overseas bonds 15±4%, and domestic stocks 25±8%.”
“That said, all assets are within their permissible ranges of deviation. This suggests that the GPIF does not necessarily have to pursue Japanese stock or foreign securities upward and can instead wait to buy on dips.”
“We see no cause for worry if Japanese pensions do not buy when the USD/JPY is rising. They should continue to support the markets with a buy-on-dip stance. “
“Meanwhile, other mutual aid associations and pensions, which have total assets of over ¥50trn, are still acquiring Japanese stocks and foreign securities to align themselves with GPIF's basic allocation ratios.”
“We believe the pace of foreign securities purchasing at both GPIF and other mutual aid associations and pensions will peak in 1H FY3/16 (Apr-Sep). As this should coincide with US data releases and the Fed's rate hike steps, we expect the USD/JPY to track in the ¥125-130 range from late this year through 2016.”