News Column

Pension funds pouring money into Japanese stock market

June 24, 2014

Japanese stock market players believe pension funds have been pouring their reserves into the market as the Government Pension Investment Fund is expected to revise its investment portfolio this fall to expand stock investment.

Expecting the stock market to rise with the GPIF portfolio revision, Japanese pension funds other than the GPIF, which manages employee and national pension reserves, might have been trying to buy stocks before their upsurge, market sources said.

The government put the GPIF's investment portfolio revision into its revamped economic growth strategy adopted Tuesday.

Market players watching the recent trend where trust banks that undertake investment on behalf of pension funds have started buying stocks while government bond holdings by public pension funds have fallen, the sources said.

While trust banks remained net stock buyers from May as indicated by Tokyo Stock Exchange trading data, the 225-issue Nikkei Stock Average rose 4.9 percent from late May to last weekend.

"As stock prices rose even in the absence of any particular factor for buying, market players are speculating that pension funds are pouring reserves into the market," said an official at a major brokerage.

The GPIF is expected to raise Japanese stocks' share of its investment portfolio by several percentage points from 17.2 percent at the end of last year when the portfolio totaled 129 trillion yen.

A 1-percentage-point rise in the fund share is a flow of more than 1 trillion yen into the stock market.

Investors in general are expected to expand their stock purchases, speculating that the government will attempt to take advantage of massive pension reserves to help stock prices.

Among major pension funds other than GPIF are mutual pension funds for public servants and private corporate funds for employees.

Mutual pension funds are expected to adjust their investment portfolios to the GPIF portfolio. Private pension funds are likely to change their portfolios in consideration of the revised GPIF portfolio.

These pension funds may be among those that have recently expanded stock purchases.

"Mutual pension funds had limited investment in stocks and are required to increase stock purchases faster for the adjustment," said Daiwa Securities Co. Senior Strategist Kenji Shiomura.

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Source: Japan Economic Newswire

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