Japan fund managers cut global stock weighting to 12-year low

Japanese fund managers cut their global stock weighting to a 12-year low in August, with risk appetite battered by worries that the United States may slide back into recession as well as by the euro zone debt crisis, a Reuters poll showed.
Their average global bond weighting climbed to match a record high. But the downgrade in the United States' credit rating by Standard & Poor's and the bickering in Washington that helped lead to it put off some Japanese investors and their North American bond weighting fell to a record low.
The allocation for Japanese bonds, which accounts for much of the global bond weighting, edged lower but remained high. The eurozone bond weighting managed a small rebound from its record low hit in July.
"Investor sentiment is going downhill as a risk-averse mood is spreading globally." said Kenichi Kubo, a senior fund manager at Tokio Marine Asset Management.
"Even though equity prices are probably oversold compared with the decline in economic fundamentals, it's hard to expect that investor risk appetite will pick up. It all depends on whether or not governments will be able to come up with policies that satisfy market participants."
The Reuters poll of 12 Japan-based institutional investors between August 17-26 showed the average equities weighting in their model portfolios falling to 42.1 percent from 43.3 percent the previous month and marking its lowest level since January 1999.
Their domestic equity weighting climbed 2.1 points to 29.2 percent, the highest level since October 2004, as fund managers focused on an economic recovery after the devastating earthquake in March.
The benchmark Nikkei average traded between 9,000 and 8,600 during the polling period after having tumbled from levels near 10,000 at the beginning of August. It was trading around 8,900 on Wednesday.
The eurozone equity weighting fell to 11.4 percent, its lowest level in more than a year, from 12.7 percent last month.
But others thought that the sharp fall in global shares were excessive and saw a near-term rebound, with one fund manager saying that it might be time to change his investment stance.
"I believe that the fall in stock prices and rising bond prices that continued until August is increasingly likely to be corrected, either on its own or by appropriate policy steps," said Yoshinori Nagano, a senior strategist at Daiwa Asset Management.