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UPDATE 1-Some investors, but not all, flee Japan

Published 04/12/2011, 10:14 AM
Updated 04/12/2011, 10:20 AM

(Updates with Japan move by Threadneedle)

By Jeremy Gaunt, European Investment Correspondent

LONDON, April 12 (Reuters) - Global fund managers cut their exposure to Japanese equities sharply in early April, following the earthquake, tsunami and nuclear disasters, a Bank of America-Merrill Lynch poll showed on Tuesday.

But at least one leading fund, Threadneedle, has increased its holdings. BofA-Merrill's poll of 282 fund managers showed a net 18 percent now underweight compared with a net 8 percent overweight a month ago.

It calculates the numbers by subtracting those managers who are underweight from those who are overweight, ignoring neutral positions.

"Japan lost all of the positioning ... gains seen in the past sixth months," the firm said, adding that exposure was now at its lowest since November last year.

The move is reflected in the performance of Japanese equities. The broad TOPIX index is down nearly 8.4 percent from where it closed on March 11 when the earthquake hit.

But not all investors are walking away. Admitting that the earthquake and following disaster had left it unable to forecast Japanese growth with any certainty, Threadneedle said it was moving overweight in the country's stocks.

"Clearly there will be a large, immediate hit to GDP in H1 (estimate -0.5%) but this will be followed by the rebuild," Mark Burgess, chief investment officer, said in a note.

"If history is a guide, this will add strongly to growth over the following 12-18 months."

Threadneedle has some 67.7 billion pounds ($110.1 billion) in assets under management globally.

Reuters asset allocation polls -- which survey investment houses rather than fund managers, as BofA-Merrill do -- showed that at the end of March, global investors had pretty much held steady in their Japan allocations.

Average allocations across the United States, Japan, Britain and Europe ex UK, to Japanese equities only fell to 12.6 percent from 12.7 percent of a global typical equity portfolio.

Most of this fall was due to European investors. U.S. and UK investors actually raised their allocations, while Japanese investors themselves only cut back a small amount.

In the 12 days since the Reuters polls were released, the TOPIX has fallen roughly 3 percent.

(editing by Patrick Graham)

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