* Top life insurers to boost foreign stock holdings
* No plans to increase domestic stock holdings
* Sticking to domestic debt as overseas yields low
By Antoni Slodkowski
TOKYO, April 30(Reuters) – Some of Japan’s life insurers are
buying overseas stocks to help boost investment returns while
sticking with domestic sovereign debt as a safe haven, several
of the companies said in interviews with Reuters.
A sluggish global economy and the euro zone’s fiscal woes
are keeping the yields of major sovereign bonds near record
lows, reducing their appeal and increasing that of stocks.
Nine of the biggest Japanese life insurers, boasting a
formidable war chest of 112 trillion yen ($1.39 trillion) in
financial assets, have lost some of their appetite for foreign
bonds, which yield only a bit more than Japanese debt and incur
high hedging costs.
That is why the firms plan to keep topping up domestic bond
holdings, helping them match assets to long-term yen
liabilities, while putting money into emerging markets.
Industry leaders such as Nippon Life and Meiji Yasuda are
looking to buy foreign equities this fiscal year ending March.
Nippon Life and Meiji Yasuda both specified they will aim to tap
growth in emerging markets.
“When it comes to foreign investment, emerging economies
have bigger growth potential than the United States and Europe
and that’s where I would like to boost our investment,” said
Yosuke Matsunaga, general manager of Nippon Life’s finance and
investment planning department.
The financial behemoth, with total assets of 49 trillion
yen, plans to buy around 100 billion yen of foreign stocks after
adding 290 billion yen in the last fiscal year, with more than
half of that amount earmarked for investment in emerging
markets.
It is mostly interested in the so-called BRIC nations of
Brazil, Russia, India and China.
FOREIGN VS DOMESTIC STOCKS
Meiji Yasuda, the industry No. 3, is targeting growing Asian
markets. It plans to boost holdings in foreign stocks to around
75 billion yen by the 2013/14 fiscal year from 28 billion yen
now.
In contrast, none of the insurers plans to increase Japanese
stock holdings this fiscal year and many have trimmed equity
portfolios in recent years to deal with government regulations
that raise the risk weighting for stocks and other assets.
Since the end of February 2009, the MSCI emerging market
index has grown over 100 percent, compared to a rise
of 25.8 percent in the Nikkei stock average of major
Japanese companies.
Japanese insurers are moving away from traditional
investment territory because of the uncertainties in the global
economy sparked by factors such as the lack of a palpable pick
up in the U.S. job market.
“We think the U.S. housing and job markets will still
continue adjustments and the Fed will keep an easy stance,”
Takashi Iida, manager of Dai-ichi Life’s investment
planning department, told a group of reporters.
YIELDS CAPPED
Most Japanese insurers limit foreign bond investments to
U.S. Treasuries and German Bunds, staying away from higher
yielding, bu t riskier sovereign debt. This includes debt issued
by Italy and Spain because of their potential exposure to the
euro area debt crisis.
The 10-year U.S. Treasury note yield stood at 1.88 percent
, just about 100 basis points over the 10-year
Japanese sovereign bond yield and less than half of the yield
advantage of more than 200 basis points it had until last June.
The 10-year German yield fell to a record low
of 1.549 percent last Monday, as investors continued to flock to
German bonds and shun debt of Spain and Italy.
Some insurers started selling French sovereign debt holdings
last fiscal year, underscoring their extremely risk-averse
strategy and the dilemma that such investors face amid a rapidly
shrinking pool of assets deemed as safe.
One of them was Daido Life, with some 5.16 trillion yen in
assets, which sold “vast amounts” of French bonds and all of its
Italian bond holdings in the last fiscal year.
“Compared to Italy and Spain (the French situation) is much
better … but if a new wave of crisis strikes, its bonds may be
sold off,” said Takashi Ikawa, general manager of Daido Life
Insurance Co’s investment planning department.
“In a crisis situation, German debt is the safest. I want to
buy more of it, but yields on it are very low so it’s hard to be
very specific at this stage,” said Ikawa, adding he does not
hold any bonds from Portugal, Ireland, Greece or Spain.
(Additional reporting by Tokyo Markets Team and Chikafumi Hodo;
Editing by Ed Lane and Muralikumar Anantharaman)
