Nippon Life Insurance Co thinks the dollar could fall to 110-115 yen by the end of March as risks to the global economy heighten, and would be ready to buy the US currency around those levels, a top executive said in on Wednesday. Hiroshi Ozeki, chief investment officer at Japan's biggest life insurer, also said Japanese share prices could fall further in the near term but the company sees current levels as a good bargain-hunting opportunity.
Concerns about a slowdown in China and a possible US rate hike have rocked financial markets in the past few weeks but the institutional investor say it is seeking opportunities to buy stocks and foreign bonds. "We have been expecting market correction ahead of a US rate hike. So the latest moves are broadly in line with our expectations, although I would say its speed was faster and it came earlier than we had thought," Ozeki told Reuters in an interview.
The dollar fell to a seven-month low of 116.15 yen last week, while Japan's Nikkei share average dropped to six-month low of 17,714.30 as investors dumped risk assets and flocked to safer assets. On top of worries about higher US interest rates, fears about China's economic growth are hurting investor sentiment. "We also think share prices could fall further. If you were a trend chaser, it might be easy to sell now but we have a long-term perspective," Ozeki said. Nippon Life thinks a solid US economy will underpin the global economy, helping to support share prices as well as the dollar against the yen.
One key area of focus for Nippon Life is foreign credit products. The company plans to double investment in them in coming few years as domestic bond yields will stay low due to the Bank of Japan's bond buying. The insurer is now increasing investment in debt rated single A and triple B, departing from its traditional stance to invest mostly in higher credits such as double A or above. "In the US, single A names are traded 100 basis points above the Treasuries. This is a very high level historically," he said.
The company is also expanding private equity investments, which has constantly produced good returns since it began investing in the 1970s. Ozeki added that the insurer is reviewing its stance on hedge funds investments. Some of the world's major pension funds have been abandoned them due to high fees.
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