HSBC Securities have raised the weighting of Japanese stocks in its model global portfolio to 15 per cent from 12.9 per cent, while lowering its US weighting to 42 from 46 per cent. "Japan looks likely to be the major market least affected by weakness in the US," the brokerage said.
Bonds are likely to fall as a sale of 10-year bonds this week may deter demand on expectations the economy will be in better shape and the central bank may drop its low-rate policy. Unexpected faster first quarter growth pushed up bonds yields.
"I'm seeing risk of falling bonds because economic sentiment is improving," said Jun Fukashiro, a fund manager at NCB Investment Management. Last week, the yield on the benchmark bond rose 3 basis points to 1.730 per cent. Over the past month, it has risen 45 basis points, handing investors a loss of 5.51 per cent. Meanwhile, the benchmark Nikkei 225 stock average gained 6.4 per cent. "In a word, it's stocks that will prevent bonds from rising," said Akitsugu Bando, a manager at Okasan Capital Management.
Optimism about the economic outlook is prompting investors to look for signs of recovery in the central bank's quarterly tankan survey of business sentiment, due early next month. If it shows an improvement, that'll also hurt bonds, said some investors. Yet few are rushing to sell bonds to snap up stocks, expecting the economy to take time to get back on track. "There's little chance the GDP figures in the April-to-June quarter will show growth," said Makoto Yokoyama, a Asahi Mutual Life Insurance manager. For him, bond yields at about 2 per cent are a great buy, he said.Reuse content