Forex Flash: Record pace of Japanese foreign equity selling continued - Nomura

FXstreet.com (Barcelona) - Nomura strategist Yujiro Goto notes that Japanese investors kept investing in foreign equities at a record pace last week.

He adds that they were net sellers of foreign equities to the tune of JPY640bn for the eleventh week in a row. He notes that this is again the biggest weekly net buying at least since 2005 and as JPY weakness and equity rallies in major equity markets continue, pension funds are likely to keep selling foreign exposure to rebalance their portfolios. Further, he adds that Japanese investors sold foreign equities to the tune of JPY1.15trn in February, of which pension funds (trust accounts of banking sector) accounted for JPY1.08trn. He believes that a large part of the foreign equity selling last week also came from pension funds before fiscal year-end. He writes, “Since they are contrarians, their selling of foreign equities may not change the trend of FX while slowing the JPY weakness. Japanese investors also sold foreign bonds for a second week, by JPY491bn. Portfolio investment outflows remain weak.”