Asia and GEM to shine soon or value traps?
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Asia’s 13% Carry Return Lures Record Japan Funds Amid Yield Hunt
Japanese investors are buying Asian assets like never before as Prime Minister Shinzo Abe’s policies make the yen a lucrative means to fund bets on regional growth.
Abe’s unprecedented stimulus to fuel inflation has boosted Asian markets, providing them with a buffer against potential outflows as the U.S. prepares to raise borrowing costs next year. Inflows to the world’s fastest-growing region are also being bolstered by the People’s Bank of China’s Nov. 21 decision to cut interest rates for the first time since 2012, and as the European Central Bank considers further monetary easing.
“Japanese investors caught the same grab-for-yield bug that investors everywhere caught,” Tim Condon, head of Asian research at ING Groep NV in Singapore, said in a Nov. 24 interview.
“With the PBOC joining the Bank of Japan in increasing accommodation, and the ECB expected to join, the grab for yield looks set to persist in 2015.”
The policies, known as Abenomics, pushed local government bond yields to among the lowest globally, prompting Japanese investors to seek higher returns abroad. Asia received almost six times more inflows from Japan in the first nine months of this year than the average over the past decade, compared with the 2.6 times for Central America and 1.3 times for North America, finance ministry data show.
Outflows are set to increase after Japan’s $1.1 trillion Government Pension Investment Fund, the world’s largest, said Oct. 31 it increased allocation targets for overseas equities to 25 percent from 12 percent and for debt to 15 percent from 11 percent.
“Indonesia, the Philippines and India are likely to be the destinations of Japanese flows,” Murata said in a Nov. 20 interview
Malaysia, Hong Kong and China were the top Asian recipients, each getting more than 230 billion yen through September. Central and South America had the biggest net inflows of 4.95 trillion yen. North America got 3.84 trillion yen, driven by 3.36 trillion yen of investments in the U.S.
“If the other emerging markets stabilize, it could draw some flows out from Asia,” Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group Ltd., said by phone yesterday. “We’ve had geopolitics turning investors off Russia and Emerging European assets, and weak growth coupled with political uncertainty impacting Latin America.”
http://www.bloomberg.com/news/2014-11-26/a...yield-hunt.html 
Nov 27 2014, 03:07 PM
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