REFILE-UPDATE 1-Foreign investors' net buying of Japan stocks jumps last week

Wed Apr 17, 2013 9:58pm EDT

By Dominic Lau

TOKYO, April 18 (Reuters) - Foreign investors' net buying of Japanese equities hit the highest last week since the Ministry of Finance started collecting the data in 2005, buoyed by the Bank of Japan's sweeping stimulus measures unveiled on April 4.

The investors bought 1.57 trillion yen ($16.1 billion) worth of Japanese stocks in the week through April 13, piping the previous record of 1.12 trillion yen in the week of March 3 to 9.

Foreign players have ploughed 8.22 trillion yen into Japanese stocks since mid-November, when Shinzo Abe, who became Prime Minister in December, promised bold expansionary monetary and fiscal policies during his election campaign.

During that period, Tokyo's benchmark Nikkei has rallied more than 50 percent, while the yen has weakened more than 20 percent against the dollar to a four-year low.

The BOJ on April 4 stunned financial markets by announcing a sweeping monetary expansion campaign aimed at breaking a defationary cycle and ending two decades of stagnation. The bold plan to inject about $1.4 trillion into the world's third-largest economy over a two-year period has won plaudits from around the globe, and lured more foreign investors into Japanese equities.

"For a long period of time until recently, overseas institutional investors would not even agree to meet us when we made sales calls and told them we are a Japanese asset management firm," said Akira Inoue, head of global business development at Sumitomo Mitsui Trust Bank's global fiduciary business department.

"Even after Japanese stocks' rally began late last year, many took a wait-and-see attitude. But the situation changed in March. Now, about 30-40 percent of institutional investors agree to meet us," Inoue said. "Before that, 90 percent of our sales call got cold reception."

The bank, a unit of Sumitomo Mitsui Trust Holdings, has received more than a dozen requests for proposals from potential clients to manage part of their assets in Japanese stocks since the end of last year.

Separately, a monthly poll of fund managers by Bank of America Merrill Lynch showed a net 20 percent of asset managers were overweight Japan, up 5 percentage points from March.

The same survey, which was conducted between April 5 and 11 after the BOJ announcement, also showed the number of fund managers who would like to go overweight Japan on a 12-month view rose by 20 percentage points to a net 26 percent in April.

REPATRIATION CONTINUE

Japanese investors, on the other hand, extended their net selling of foreign bonds to 331.9 billion yen last week after selling 1.14 trillion yen the prior week.

Last week, they repatriated a total of 548.2 billion yen, taking advantage of a weaker yen as it would boost their profit when they translate foreign assets back to the Japanese currency.

Since the start of the year, Japanese investors repatriated a total of 8.57 trillion yen. That compared with a net outflow of 3.32 trillion for the same period last year.

"Recent acceleration in yen weakness encouraged retail investors to lock in profits," Nomura Securities said in a note. "In addition, retail investors may prefer domestic risky assets, especially Japanese equities to foreign assets as the economic outlook has been improving significantly."

"Even though we expect toshin (investment trust) momentum to recover gradually, there may have to be more net selling due to profit-taking before a clear pick-up in the momentum."

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