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Japan fund managers trim equity exposure in May: Reuters poll

EconomyMay 30, 2017 11:40PM ET
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TOKYO (Reuters) - Japanese fund managers trimmed their model portfolios' exposure to equities in May, a Reuters poll found, in a month in which U.S. political turmoil curtailed institutional investors' appetite for riskier assets.

The survey of five Japan-based fund managers conducted between May 17 and 24 showed respondents on average wanted to allocate 38.1 percent of their model portfolios to stocks in May, from 39.1 percent in April.

Helped by strong corporate earnings, the S&P 500 (SPX) rose to a record high in mid-May before sliding on strife that gripped Washington, building uncertainty over U.S. President Donald Trump's political future amid reports he tried to quash a federal probe into alleged election meddling by Russia.

Still, U.S. equities had recovered most of their losses toward the month's end, with their global peers following a similar pattern.

Poll respondents increased North American stock exposure to 30.5 percent in May from 28.0 percent in April. They also raised their allocations to Japanese stocks to 46.3 percent from 43.8 percent, while cutting exposure to British stocks to 2.5 percent from 5.0 percent.

"Equities are expected to remain at high levels once excessive risk aversion runs its course," said Yuichi Kodama, chief economist at Meiji Yasuda Insurance.

"Geopolitical risks as well as U.S. and European political uncertainty remain, but corporate earnings this fiscal year are likely to be strong thanks to the strength seen in various economies."

The respondents slightly increased their overall exposure to safe-haven bonds to 55.9 percent in May from 55.5 percent in April.

They raised their North American bond holdings to 33.9 percent in May from 31.9 percent in April. U.S. debt became more affordable for investors earlier in May, with the 10-year Treasury yield (US10YT=RR) rising above 2.40 percent from a five-month low of 2.16 percent touched mid-April.

Respondents increased euro zone bonds to 21.5 percent from 20.5 percent and trimmed Japanese bonds to 36.0 percent from 37.3 percent.

Japan fund managers trim equity exposure in May: Reuters poll

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