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INTERVIEW-Mitsui Sumitomo Insurance sticks to foreign asset investment in 2H
October 7, 2016 / 5:20 AM / a year ago

INTERVIEW-Mitsui Sumitomo Insurance sticks to foreign asset investment in 2H

* Sticks to full-year plan to invest 70 bln yen in foreign assets

* Slightly increases ‘open foreign bonds’

* Will continue to invest in Japanese corporate debt

By Ayai Tomisawa

TOKYO, Oct 7 (Reuters) - Japan’s Mitsui Sumitomo Insurance Co bought over 30 billion yen in overseas assets in the first half and will maintain its plan to invest in foreign assets for now because of record-low Japanese debt yields, a senior executive said on Friday.

The core company of MS&AD Insurance Group Holdings, which had 6.8 trillion yen in total assets as of March 2016, plans to invest a total of about 70 billion yen in foreign assets such as bonds, stocks and private equity commitments this financial year through March 2017, Hiroaki Hara, manager of investment planning at Mitsui Sumitomo, told Reuters in an interview.

“Open foreign bonds” - foreign bonds bought without currency hedging - account for about 35 billion yen of the total foreign assets.

“We are slightly increasing open foreign bonds, but we don’t want to increase dramatically because foreign bond yields are not that high, either,” Hara said.

With Japanese government bond yield falling to record lows under the Bank Of Japan’s negative interest rate policy, the insurer plans to keep its domestic bond assets flat this year.

Instead, the insurer will stick to its plan to invest about 80 billion yen in Japanese corporate debt for this fiscal year, roughly the same as the previous year, Hara said.

The BOJ surprised markets by introducing measures to control the yield curve in its last policy meeting on Sept. 21 and said it would aim to keep the 10-year government bond yields at around zero percent.

“Our plan to refrain from buying 10-year JGBs hasn’t changed. Despite the BOJ’s new policy, the yields are trading in negative territory anyway,” Hara said, tipping the 10-year JGB yield to trade between 0.05 percent and minus 0.15 percent during the second half.

The 10-year Japanese government bond yield fell to a record low of minus 0.300 percent in early July, flattening the yield curve. It has moved between 0.005 percent and minus 0.090 percent since the BOJ’s latest measure.

On Friday, it was at minus 0.065 percent.

Hara expects the Nikkei share average to trade between 15,500-18,000 in the Oct-March period, compared with 16,847.11 by 0400 GMT on Friday.

Mitsui Sumitomo Insurance plans to cut holdings of domestic stocks as it is in the third year of a four-year plan to reduce such exposure by a total of 500 billion yen.

Many Japanese insurers have been slowly unwinding their cross-holdings of shares, recognising the risk they pose to their financial health.

Editing by Shri Navaratnam

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