Japanese fund managers lifted their assets allocated to shares in July, mainly in North American and domestic markets, expecting earnings to improve as these economies recover, a Reuters poll showed on Wednesday.
A survey of eight Japan-based fund managers, polled between July 17 and 24, however, also found the managers were concerned that tapering of the US Federal Reserve's stimulus could destabilise emerging economies.
The managers raised their overall allocation of assets to shares to 43.7 percent this month from 39.7 percent in June, though one respondent left the survey this month. On a like-for-like basis, the allocation in June would have been 43.4 percent.
The record-high asset allocation to shares was 60.2 percent in April 2004. Their allocation of assets to bonds dropped to 49.9 percent from a record high of 53.6 percent, reached in June, while there were limited changes in weightings to cash, property and alternative assets.
"US earnings so far have been mixed so the market could be range-bound in the near term. But in the medium-term, they are likely to extend their uptrend, supported by companies and sectors with strong earnings," said a fund manager at a Japanese asset management firm, who declined to be identified because of a company policy.
Wall Street shares hit record highs during the survey period, helped in part by an assurance from the Federal Reserve Governor that the Fed will likely keep rates near zero for a long time, even after it scales back bond buying. Within their equity portfolios, fund managers raised the Japanese stock weighting to a one-year high of 36.8 percent from 34.6 percent in June.
Japanese shares lost momentum after hitting a 5 1/2-year high in May when Prime Minister Shinzo Abe's growth strategies failed to inspire investors. But some investors were hoping he would take more drastic steps after his ruling coalition won a decisive election victory earlier this month, cementing his grip on power.
Fund managers also raised the weighting on US and Canadian shares to a 15-month high of 34.3 percent from 33.0 percent in June. In contrast, weighting for Asian shares dropped to 3 1/2-year low of 6.1 percent from 9.8 percent last month.
While that drop stemmed largely from the departure of one survey respondent, it also reflected caution that tapering of the Fed's money-printing could hurt emerging economies that have benefited from cheap money from the Fed. "Tapering may be the optimal policy for the US economy but not necessarily for the entire world economy," said another fund manager at a Japanese asset management firm, who declined to be named. Asian shares have been roiled also by Beijing's attempt to rein in rapid credit expansion and risky loans to restructure China's economy. Shanghai shares were trading not far from 4 1/2-year low hit last month.