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4 Jun 2014
GPIF assets re-allocation limits USD/JPY downside - Nomura
FXStreet (Bali) - Yujiro Goto, FX Strategist at Nomura, notes that the latest news on the GPIF front should limit the downside risks in USD/JPY.
Key Quotes
"The head of the GPIF investment committee, Yonezawa, said that the fund may announce its new target portfolio in August, if the government asks it to do so, according to Nikkei."
"He said the change in target portfolio will occur this autumn, based on the article over the weekend, but an earlier timing for the change is more likely."
"As the Ministry of Health has announced its fiscal review on public pension funds today, the GPIF can start considering its new target portfolio based on the calculations made by the Ministry."
"Based on Mr. Yonezawa's comments, the change is likely to happen in Q3 this year, which is in line with market expectations based on our client survey result."
"The magnitude of the portfolio shift can be bigger than the market expects. Mr. Yonezawa said that a 20% share for domestic equity is not necessarily too high, which suggests that he is comfortable with raising the share of domestic equity from 12% to 20%."
"In addition, a 20% share for domestic equity would enable the fund to avoid the liquidation of domestic equities going forward. GPIF's domestic equity share was around 17% as of end-December, as the fund has been flexibly managing its portfolio within its allowable deviation (6% from central). 20% domestic equity share is higher not only than the current target but also than the current share."
"Thus, Mr. Yonezawa's idea to raise domestic equity share to 20% would not disappoint equity investors, limiting the downside risks of USD/JPY."
Key Quotes
"The head of the GPIF investment committee, Yonezawa, said that the fund may announce its new target portfolio in August, if the government asks it to do so, according to Nikkei."
"He said the change in target portfolio will occur this autumn, based on the article over the weekend, but an earlier timing for the change is more likely."
"As the Ministry of Health has announced its fiscal review on public pension funds today, the GPIF can start considering its new target portfolio based on the calculations made by the Ministry."
"Based on Mr. Yonezawa's comments, the change is likely to happen in Q3 this year, which is in line with market expectations based on our client survey result."
"The magnitude of the portfolio shift can be bigger than the market expects. Mr. Yonezawa said that a 20% share for domestic equity is not necessarily too high, which suggests that he is comfortable with raising the share of domestic equity from 12% to 20%."
"In addition, a 20% share for domestic equity would enable the fund to avoid the liquidation of domestic equities going forward. GPIF's domestic equity share was around 17% as of end-December, as the fund has been flexibly managing its portfolio within its allowable deviation (6% from central). 20% domestic equity share is higher not only than the current target but also than the current share."
"Thus, Mr. Yonezawa's idea to raise domestic equity share to 20% would not disappoint equity investors, limiting the downside risks of USD/JPY."