Japanese fund managers increased their assets allocated to equities to a 1-1/2-year high in October on expectations that the US Federal Reserve will not reduce its stimulus in the near future, a Reuters poll showed on Thursday. A survey of eight Japan-based fund managers, polled October 17-23, also found they had raised their allocation to euro zone bonds to a 2-1/2-year high amid signs the euro zone economy is recovering from the damage of its debt crisis.
The fund managers raised their overall allocation of assets to shares to 44.2 percent, an 18-month high, in October from 44.0 percent in September. They also increased their bond allocation slightly to 49.0 percent from a 16-month low of 48.9 percent in September. "Rising expectations that the Fed will delay reducing its stimulus after the government shutdown are keeping interest rates low and are positive for stocks," said a fund manager at a Japanese asset management firm, who declined to be identified because of company policy. "But the improvement in economic sentiment is limited globally so investors' buying will concentrate on shares and sectors with good earnings," the fund manager added.
Although Federal Reserve Chairman Ben Bernanke had said in May that the Fed could start reducing its $85 billion-a-month bond buying programme later this year, the Fed surprised markets by not doing so in September. Many market participants think the Fed will delay tapering its stimulus at least until early next year as a 16-day government shutdown this month is likely to have disrupted the US economy.
Such expectations helped drive the US Standard and Poor's Index to a record high this week. Within their equity portfolios, fund managers raised weightings for the euro zone and emerging European markets while cutting those for most other markets including the United States, Japan and Asia. The equity weighting for the euro zone rose to 10.5 percent from a record low of 8.8 percent in September.
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