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.