2 Dec 2015
GPIF to remain supportive for USD/JPY – Deutsche Bank
FXStreet (Delhi) – Taisuke Tanaka, Strategist at Deutsche Bank, suggests that the GPIF will remain supportive for USD/JPY by dip-buying as around 120 or lower, while unlikely to drive rally at above 125
Key Quotes
“The GPIF's disclosed assets under management as of end-September totaled ¥135.1trn, down 4.3% from end-June. Risk assets lost value as a string of China shocks in Jul-Sep resulted in a decline in stocks and yen appreciation. According to flow statistics, pension funds actively bought risk assets on dips in Jul-Sep. The balance of foreign bonds grew by 0.6% vs end-June, while domestic equities fell by 11.7% and foreign equities by 6.2%.”
“Equity prices and the USD/JPY partially recovered lost ground in Oct-Nov, so the GPIF's performance should have also improved somewhat. Questions about the market supporting impact of dip-buying by the GPIF (including three former mutual pension funds from October) are unlikely to increase immediately because its overall ratio of risk asset holdings at end-September did not rise.”
“The WSJ reported that GPIF has started a small amount of forex hedging against near-term euro fluctuations. According to the report, GPIF indicated the possibility of partial introduction of a forex hedging program going forward, while striving not to have a negative impact on the market. Even if the report is true, we see no need to change the basic understanding.”
“In 2016, we believe the GPIF will not sell to boost the market when the USD/JPY is above 125, rather we see the possibility gradually increasing of capping through profit-taking or hedging. However, we expect it will continue to provide strong support through buying on dips, especially around 120 or lower.”
Key Quotes
“The GPIF's disclosed assets under management as of end-September totaled ¥135.1trn, down 4.3% from end-June. Risk assets lost value as a string of China shocks in Jul-Sep resulted in a decline in stocks and yen appreciation. According to flow statistics, pension funds actively bought risk assets on dips in Jul-Sep. The balance of foreign bonds grew by 0.6% vs end-June, while domestic equities fell by 11.7% and foreign equities by 6.2%.”
“Equity prices and the USD/JPY partially recovered lost ground in Oct-Nov, so the GPIF's performance should have also improved somewhat. Questions about the market supporting impact of dip-buying by the GPIF (including three former mutual pension funds from October) are unlikely to increase immediately because its overall ratio of risk asset holdings at end-September did not rise.”
“The WSJ reported that GPIF has started a small amount of forex hedging against near-term euro fluctuations. According to the report, GPIF indicated the possibility of partial introduction of a forex hedging program going forward, while striving not to have a negative impact on the market. Even if the report is true, we see no need to change the basic understanding.”
“In 2016, we believe the GPIF will not sell to boost the market when the USD/JPY is above 125, rather we see the possibility gradually increasing of capping through profit-taking or hedging. However, we expect it will continue to provide strong support through buying on dips, especially around 120 or lower.”