Japan fund managers raise allocations to both stocks and bonds

TOKYO, July 31 (Reuters): Japanese fund managers increased both stocks and bonds in their model portfolio allocations in July, as they bet on a steady recovery in the global economy even as the Federal Reserve keeps reducing stimulus.
The survey of eight Japan-based fund managers, polled by Reuters between July 16-23, also showed they increased euro zone stocks after the European Central Bank adopted a series of easing steps in June.
The overall allocations to equities rose to 44.8 per cent in July from 44.2 per cent in June while those to bonds also increased, to 48.5 per cent from 47.9 per cent the previous month. The fund managers cut all other three small categories - cash, alternative assets and properties.
"While the Fed keeps tapering, the ECB and the Bank of Japan maintain an easing stance, leaving favourable conditions for stocks," said a fund manager at a Japanese asset management firm.
Within the equity portfolio, fund managers raised weightings on euro zone shares rose to 14.4 per cent - highest since October 2011 - from 9.1 per cent in June.
The ECB cut the key interest rates, pledged to keep them low "for an extended period" and offered cheap long-term loans for up to four years.
Instead, the managers cut US stocks to a record low of 27.8 per cent from 33.1 per cent last month as Wall Street shares rallied to all-time highs.
"Reportings from flagship IT firms are mixed. This year's spring-up in shares boosts valuations to the expensive territory," said another fund manager at a European asset management firm.
Fed chief Janet Yellen in July voiced concern about stretched valuations in certain corners of the US markets, including small cap, biotechnology and social media stocks.
Within bonds, fund managers were attracted to relatively higher yields in the United States compared to Japanese and euro zone bonds.