- Data from balance-of-payments (BOP) indicates that Japan investors had gobbled up about $9 billion (approx. 1 trillion yen) of Asian debt by November last year.
- Chief strategist at Nomura Asset Management Co., Shigeki Sakaki said that owing to increased investors appetite, there is a need to have riskier bonds with returns of around 3%-4% or 5%-6%.
- Japan Ministry of Finance registered a total of 175.1-billion-yen worth of foreign bond investments last week alone.
Japanese fund managers say local investors’ appetite was fast-growing having purchased emerging-Asian bonds on record in 2019.
During the first eleven months of last year, Japan investors gobbled up about $9 billion (approx. 1 trillion yen) of Asian debt, and this is according to recent data from balance-of-payments (BOP). While the data is a month short of a year, it is the highest since 2005.
Last year’s Fed bank’s move to ease the markets seems to have pushed the nation’s investors to riskier assets. And as the global market continues to improve, emerging markets, including Indonesia and China, will be some of the most attractive.
“Investors are allocating more funds into emerging markets to take more risks,” the chief strategist at Nomura Asset Management Co. Shigeki Sakaki stated. “There’s a need to add bonds that are yielding around 3%-4% or 5%-6% into their portfolios.”
Sakaki said that most Japan-based money managers had previously been focusing on bonds mainly in South Africa and Turkey. But a growing interest in the Asian market is fast gaining traction. Japan data track now shows the presence of substantial investments in India, South Korea, Southeast Asia, and China. The records also indicate growing Japanese investors’ portfolios in Singapore and Hong Kong.
Records show that compared to the last record high in 2014, last year’s bond purchases broke the record by nearly 16%.
With dropping global currency volatility, returns of Asian bonds seem to be standing out, according to Bloomberg.
In an environment where bonds for countries such as China and Indonesia are fetching as high as 3% to 7% yields, the markets are set to shift from traditional debt instruments with less than 2% returns, an example being the US 10-year Treasuries.
China continues to make it easier for foreign investors to flood their markets, paving the way for Japanese money managers to purchase more bonds.
Eiichiro Miura, the general manager of the fixed-income department at Tokyo-based Nissay Asset Management Corp., said: “There are increasing views that the global economy won’t slow down as U.S.-China trade affairs are expected to improve. That will support risk appetite.”
Japan Ministry of Finance registered a total of 175.1-billion-yen worth of foreign bond investments last week alone.
Japan Post Insurance Co. also said it would be assuming more risk in the days to come by allocating more resources to emerging foreign bond markets.