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Three Japan public pension funds buying stocks ahead of asset review - sources
June 25, 2014 / 8:36 AM / 3 years ago

Three Japan public pension funds buying stocks ahead of asset review - sources

By Tomo Uetake and Hideyuki Sano
    TOKYO, June 25 (Reuters) - Three Japanese "semi-public" pension funds
aggressively bought Tokyo stocks in recent weeks, market sources said, acting
before a review of their asset allocation policies is complete.
    The funds' buying helped Japanese shares to rally more than 10 percent in
just over a month - though one source said the buying may come to a halt before
month-end, posing the threat of a near-term correction to the market.
    All three funds declined to comment on whether they bought shares in the
last two months.
    The three pension funds - the Pension Fund Association for Local Government
Officials, the Federation of National Public Service Personnel Mutual Aid
Association and the Private School Mutual Aid System - manage a combined 29
trillion yen ($284 billion) of assets. 
    The funds will be merged into the 129 trillion yen ($1.26 trillion)
Government Pension Investment Fund (GPIF), the biggest pension fund in the
world, in October next year.
    A market source, who was briefed on the matter, said the three semi-public
pension funds transferred money to portfolio managers in May, requesting them to
finish buying up shares before end-June.
    Data from the Tokyo Stock Exchange also pointed to heavy buying by public
accounts since May.
    Buying by trust banks, which manage a large proportion of public pension
funds, soared to 687.3 billion yen in May, the most since March 2009, when there
was a whisper of buying by public accounts to prop up the market as share prices
hit 25-year lows.
    Trust banks' stock-market buying continued in June, investing an additional
200 billion yen in the first two weeks - a sea change from their persistent
selling when the market began rallying on hopes of Abe's aggressive stimulus. 
    From mid-November 2012 to mid-May 2013, during which Japanese share prices
gained almost 80 percent, trust banks sold shares in all but one week, selling
almost four trillion yen worth.
    Market players say trust banks' buying was a major driving force behind a
rally in Japanese shares since late May.
    After hitting a one-month low on May 21, the Nikkei average has
risen almost 10 percent and the broader Topix index almost 11 percent so
far.
    That gain compared with 3.8 percent rise in the U.S. S&P 500 index 
and 1.3 percent rise in ex-Japan Asian-Pacific shares.
    The pension funds' stampede into shares reflects Abe's strong push to make
public pension funds buy more stocks to spur economic growth by channelling
money into risk assets, a major plank in his "Abenomics" platform to boost
growth. 
    Against this backdrop, the country's biggest retirement investor, the GPIF,
is widely expected to increase its allocation to stocks.
    Abe earlier this month called for the GPIF to speed up its asset allocation
review. Many market players expect the final decision later this year, with
several speculating the fund has already started moving funds into shares.
 
    Currently the GPIF targets 6 - 18 percent of its assets to Japanese stocks
and 52 - 68 percent to domestic bonds, but market players expect the stock
allocation target could be raised to a range around 20 percent.
    As of March last year the three semi-public funds held 3.5 trillion yen in
domestic shares, compared to 5.8 trillion yen if they were to allocate 20
percent of their funds to stocks.
    Compared to the GPIF, two of the three smaller pension funds have a much
lower allocation to stocks, suggesting they will need to sharply increase their
holdings of shares as the planned merger in 2015 approaches.
    "It would not be a surprise if pension funds other than the GPIF are
changing asset allocations now," said Kenji Abe, chief equity strategist at
Citigroup Global Markets Japan.
    
    ($1 = 102.0500 Japanese Yen)

 (Editing by Eric Meijer)

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