Japanese investors wary of Asian stocks
Japanese investors wary of Asian stocks
TOKYO (Reuter): Japanese investors are becoming wary of
putting money in southeast Asian securities amid political woes
and economic slowdown in the area, and this has also depressed
trade in Asian currencies, fund managers say.
Many nations in Asia, regarded as the world's fastest-growing
region, are facing declines in the pace of their economic growth
for the first time in years.
Some Asian currencies have come under speculative assault this
year because of political jitters and problems with deficits in
their current account, currency dealers said.
"High growth in Asian nations is about to reach a turning
point," said Kimiharu Fujisawa, a fund manager at Yamaichi
Investment Trust Fund Management Co Ltd. "There is also a feeling
of uncertainty concerning some nations in the future when new
leaders take over after the current ones."
Nomura Research Institute Ltd has forecast for 1996 a 7.6
percent growth in major Asian economies. This forecast was down
from 8.4 percent last year, while Nomura's forecast for next year
stands at 7.5 percent.
"We are wary of boosting a fund shift to Asian nations amid
signs of economic slowdown and potential political risks," said
Kengi Iguchi, general manager at Asahi Investment Trust
Management. "The volume of Asian stocks (held by Japanese
investment trust firms) is now at around 60-70 percent of what it
was during its peak in 1993," he added.
Japan's investment trust fund management firms are regarded as
a major driving force in trade in Asian currencies in Japan due
to their Asian stock investments.
Their outstanding holdings of Asian stocks stood at around 643
billion yen (US$5.89 billion) at end-June, down from 828 billion
yen ($7.59 billion) at the end of 1995, according to data issued
by the Investment Trusts Association of Japan.
Trading in Asian currencies has been lackluster in Tokyo for
the past year as Japanese investors have been cautious about
investing in securities in southeast Asian nations.
Banking industry sources said monthly trading volume of Asian
currencies via brokers in Tokyo is a low $2-3 billion, far below
than the volume of dollar/yen transactions.
"Although the huge flow of direct investment from Japanese
corporations is still continuing, securities investments have a
bigger impact on Asian currency transactions," said an official
at the Asian currencies section at a major Japanese bank.
Even though there is growing opportunity for Japanese firms to
conduct commercial currency transactions with their Asian
subsidiaries due to a rapid shift in their production to overseas
bases, they tend to use yen and U.S. dollars for settlements to
avoid currency risks, he added.
"Taking political risks into account, even high-yielding Asian
currencies such as the Indonesian rupiah are not so attractive,"
said the Asian desk official at the Japanese bank.
In July, Indonesia was shaken by riots in Jakarta, the worst
violence to hit the capital in more than two decades.
Some market sources cited the yen's recent weakness as another
negative factor for other Asian currencies.
"A weaker yen is hurting the economies of some Asian nations
such as South Korea and Singapore by making their exports less
competitive," said the Japanese bank official.
The Thai baht was one of the currencies most under pressure
this year and it may suffer more attacks if short-term capital
flees in light of the Thai current account deficit, dealers said.
South Korea's won fell to a six-year low against the dollar in
August as the nation's current account deficit worsened.