Reuters: US Dollar Report: UPDATE 1-Nippon Life: to boost holdings of emerging mkt stocks

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UPDATE 1-Nippon Life: to boost holdings of emerging mkt stocks Apr 24th 2012, 06:46 Tue Apr 24, 2012 2:46am EDT * To buy Y100 bln of foreign stocks, mostly in emerging mkts * But will still put over 70 pct of Y1.5 trln of new money into yen debt * May boost foreign bond holdings this FY, no comment on hedging * Still holds more than Y250 bln of Italian bonds * Sold Y410 bln of unhedged foreign debt partly due to yen fall last FY By Antoni Slodkowski and Takeshi Yoshiike TOKYO, April 24 (Reuters) - Japan's top life insurer, Nippon Life, plans to boost its holdings of emerging market stocks in the current financial year as it looks to ease its reliance on domestic investments by tapping growth in other regions. The firm, with total assets of 49 trillion yen ($604 billion), also said it could buy foreign bonds after selling them in large amounts as the yen fell at the end of the last fiscal year, an executive said. "When it comes to foreign investment, emerging economies have bigger growth potential than the United States and Europe and that's where I would like to boost our investment," said Yosuke Matsunaga, general manager of Nippon Life's finance and investment planning department. He told reporters on Monday that he expected the global economy to slowly recover, though it may run into speed bumps given sluggish improvement in the U.S. jobs market and the smouldering euro zone crisis. His comments were embargoed until Tuesday. The firm, also known as Nissay, plans to bolster its buying of foreign stocks by 100 billion yen, after last year adding 290 billion yen's worth, with more than half of that earmarked for investment in emerging markets. "We are obviously a Japanese insurance firm ... and while we are not changing our stance of investing chiefly in Japan, taking various risks into consideration there is the need to further diversify our investments," said Matsunaga. Nissay expects to allocate more than 70 percent of new funds for the business year started on April 1, estimated at 1.5 trillion yen, to yen debt. But while foreign stocks comprise only a fraction of the company's portfolio, its willingness to tap growing markets underscores the difficulties life insurers face, with yields on sovereign debt in many developed economies hovering at record lows. Matsunaga said he is mostly interested in stocks of the so-called BRIC nations of Brazil, Russia, India and China, and that the firm would actively manage any such holdings, paying particular attention to volatility in those markets. Japan's top nine life insurers manage some 112 trillion yen in financial assets and their investment decisions are closely watched due to their impact on markets. Nissay also bought domestic stocks when they were relatively cheap following the March 11 earthquake, selling them during a rally in equities later in the fiscal year. That led to an overall reduction in its Japan stock holdings by some 30 billion yen to about 5.76 trillion yen. It planned to keep the holdings steady this year, but stressed it would manage them depending on market moves, as in the previous year. OFFLOADING Nissay offloaded about 200 billion yen of Italian sovereign debt in the year that ended March 31, though it still holds more than 250 billion yen's worth of the paper. Matsunaga did not specify whether this was hedged. The company does not have any debt from Spain, Portugal, Ireland and Greece, however. More broadly, Nissay held about 2.2 trillion yen of unhedged foreign bonds at the end of the last business year, after selling a net 410 billion yen's worth. "Towards the end of last business year the yen fell quite nicely and that - rather than reducing exposure to risk assets - was behind our operations (to sell unhedged foreign bonds)," Matsunaga said. "I could imagine we might buy back the proportion that we sold (last year) if the timing is right this year. I don't know if that would be in hedged or unhedged bonds." While he did not say the level at which he would be ready to buy dollars, Nippon Life forecast the currency to fetch between 75 to 85 yen at the end of the current business year, compared with 80.90 yen on Tuesday. Nissay also held 5.5 trillion yen of hedged foreign bonds, having boosted the holdings by 380 billion yen in the last financial year. Investors can hedge their currency exposure to foreign bonds by selling foreign currency in forward contracts. Nippon Life plans to increase its yen bond holdings further, having boosted them by 1.49 trillion yen in 2011/12. It expects the 10-year Japanese government bond yield to move between 0.9 and 1.5 percent this year, compared with around 0.915 percent on Tuesday, a whisker above the lowest level since October 2010. Link this Share this Digg this Email Reprints

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