Japan fund managers raise stock allocations in March, trim bonds

Japanese fund managers raised overall stock allocations and trimmed exposure to bonds in their model portfolios in March as risk aversion in global markets eased, a Reuters survey found on Thursday.
A survey of six Japan-based fund managers, conducted March 18-25, showed respondents on average wanted to allocate 43.1 percent of their portfolios to equities, up from 39 percent in February.
The S&P 500 and Japan's Nikkei were both on track to rise more than 6 percent in March, but the Nikkei is still down about 11 percent so far this year after a bruising start to 2016 on concerns about the slowing global economy, particularly that of China.
The respondents raised allocations to US and Canadian stocks to 28.8 percent in March, highest since June 2015, from 16.2 percent in February. On the other hand, they reduced allocations to Japanese stocks to 53.1 percent from 58.8 percent.
A more cautious tone by the US Federal Reserve, which reduced its interest rate hike expectations for this year to two from four this month, and a bounce in battered commodity prices were among the factors that helped risk sentiment.
But resulting pullbacks in the dollar have seen the yen firm, resulting in choppy trade, particularly in exporters' stocks.
"The situation remains unchanged since the end of last year. Whether equities can break further out of their current range depends on China's policies and the performance of its economy," said a fund manager who declined to be named due to company policy.
The respondents trimmed their global bond allocation to 52.4 percent in March from 54.9 percent in February.
Fund managers reduced Japanese debt holdings to 39.9 percent in March, lowest since June 2015, from 45.7 percent in February, underlining an increasing preference by Japanese investors for foreign bonds with Japanese government bond yields touching record lows below zero under the Bank of Japan's new negative interest rate policy.
The benchmark 10-year JGB yield fell to an all-time low of minus 0.135 percent this month.
The fund mangers increased their North American debt exposure to a 10-month high of 33.9 percent from 27.2 percent, with the Fed expected to hike less frequently this year than anticipated earlier.