--Asian investors cutting back their holdings of risky assets
worried about weak economy in the U.S., debt crisis in Europe
--Big sovereign wealth funds and institutional investors are
reducing their investments in stocks and bonds.
By PR Venkat and Samuel Holmes
SINGAPORE--Many of Asia's biggest investors are cutting their
holdings of risky assets, worried about the weak economy in the
U.S. and the debt crisis in Europe.
Asia's big sovereign wealth funds and institutional investors,
who collectively control about $1 trillion, are reducing their
investments in stocks and in some cases bonds and boosting their
cash stakes.
The Government of Singapore Investment Corp.-- he sovereign
wealth fund which according to analysts manages about $300
billion--was the latest to express concerns in its annual report,
released Tuesday.
GIC, which manages Singapore's foreign-exchange reserves, said
it boosted its cash holdings to 11% from 3% of its portfolio and
cut its stock holdings to 45% from 49% for the year-ended March.
Allocation to bonds dropped to 15% from 20% last year as bond
yields in the developed markets were pushed down to "abnormally"
low levels by the flight to safe asset and central bank
intervention.
"Due to the heightened uncertainty in global markets, we allowed
the cash inflow from investment income and fund injection to
accumulate during the year in preparation for better investment
opportunities," GIC Group Chief Investment Officer Ng Kok Song said
in the report.
Asian fund houses including Amundi Asset Management, Invesco,
ING Investment Management, J.P. Morgan Asset Management and
Eastspring Investments are also increasingly turning cautious.
According to a Dow Jones Newswires survey, which included these
fund houses, fund managers have shifted to cash for the first time
since April 2009.
While some strategists say the move into cash and other safe
haven assets partly represents a short-term tactical shift before
investors look to re-invest in cheaper assets, others say any
conviction investors may have had about European policy makers
successfully fixing the region's fiscal problems is evaporating
while U.S. economic fundamentals also remain a concern.
Investors "have been a bit disillusioned by the volatility and
performance of equities looking perhaps for a more conservative
play for the time being," said Anthony Michael, Asia head of fixed
income at Aberdeen Asset Management, which has $286.6 billion in
assets under management globally.
Singapore-based Temasek, which manages close to $160 billion,
said earlier this month it saw a decline in its public equities
portfolio for the fiscal year ended March 31 to 73% from 78% a year
earlier, while investments in unlisted assets rose to 27% from 22%
a year earlier.
It also said it is shifting its focus towards emerging markets,
shelling out for energy and resources assets. Energy and resources
made up 6% of Temasek's holdings as of March 31, up from 3% a year
earlier. Financial services' share of the portfolio slid to 31%
from 36%, mainly because of declining market values.
China Investment Corp., which manages $482 billion, said last
week it has significantly reduced its holdings of public securities
and accelerated a push into longer-term investments to shield
itself from short-term market swings. CIC, which posted a 4.3% loss
on its global portfolio in 2011, said public equities made up 25%
of its global portfolio at the end of last year, down from 48% at
the end of 2010.
Long-term assets -- which include direct investments in
nonpublic companies and private equity -- and hedge funds together
accounted for 43% of its portfolio. Another 21% was in fixed-income
securities, with 11% in cash.
Although worries remain that Asia may see a moderation in
overall growth especially due to a slowdown in China, investment
firms continue to remain optimistic about the region thanks to
rapid urbanization and rising middle class incomes.
GIC saw its portfolio in Asia increase to 29% for the fiscal
year ended March from 27%, with Europe falling to 26% from 28%.
Americas, which is still the largest investment destination
remained unchanged at 42%. Temasek, a pure equity investor, has
nearly 72% of its funds invested in Asia and Singapore.
"We continue to stay in net cash, and have the full flexibility
to respond to opportunities when they arise, or stay liquid
depending on the risks ahead," S. Dhanabalan, chairman of Temasek,
said earlier this month.
Write to PR Venkat and Sam Holmes at Sam.Holmes@dowjones.com
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