TOKYO (Reuters) - Japanese fund managers cut their exposure to Japanese stocks in their model portfolios in May as the domestic market took a big knock after the Bank of Japan refrained from easing monetary policy last month, a Reuters survey found on Friday.
A survey of six Japan-based fund managers, conducted between May 16-22, showed respondents on average wanted to allocate 49.0 percent of their equity allocations to Japanese stocks in May, down from 60.5 percent in April and the lowest since June 2015.
Japan's Nikkei (N225) sank nearly 7 percent over the course of two days after the central bank stood pat on monetary policy on April 28.
Weighed down by an ensuing appreciation of the yen, the Nikkei has managed to recover only half of those losses through May, with the markets now looking for the central bank to ease in June or July.
"The BOJ may be able to go through June by standing pat on monetary policy if the dollar remains at current levels of around 109 yen. But it would be difficult for the BOJ not to do anything at the July meeting if their 'tankan' business survey points to a clear deterioration in corporate sentiment," wrote Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.
The dollar fell to an 18-month low of 105.55 yen
The fund managers allocated 42.5 percent of their overall portfolios to equities in May, only a slight reduction from 43.3 percent in April.
While they slashed exposure to Japanese stocks, the respondents raised allocations to North American equities to 26.8 percent in May from 23.8 percent in April. They also increased their euro zone stock exposure to 9.5 percent from 4.6 percent.
The respondents trimmed their allocations to bonds to 49.4 percent in May from 51.9 percent in April amid revived bets that the Federal Reserve could raise interest rates in June or July.
They dropped their exposure to North American debt to 29.7 percent from 34.6 percent, while increasing allocations of Japanese bonds to 42.2 percent from 37.2 percent, with JGB yields having nudged up from record lows this month.