* Cautious on euro bonds given ECB tapering prospects,
* FX-hedged foreign bonds still more attractive than JGBs
* Sees firm economic recovery and rise in share prices
* To change scenario if Trump seen failing to carry out
(adds details, quotes and background)
By Hideyuki Sano
TOKYO, April 25 Dai-ichi Life Insurance will be
cautious about buying European bonds given prospects of the
European Central Bank's tapering its bond purchases and the
uncertainties posed by elections in France, Germany, UK and
Italy, a senior official said on Tuesday.
Although the company sees diminishing risk in France as
opinion polls show centrist Emmanuel Macron is likely to win the
run-off due on May 7, it remains wary ahead of elections in the
UK and Germany later this year and in Italy next year, said
Kazuyuki Shigemoto, general manager of investment planning.
"While European bonds' yields are attractive, if you ask
whether you can increase holdings in them, we think it is
appropriate to have a cautious stance now," Shigemoto told a
The risk of so-called Frexit, or France's departure from the
European Union, appears to have eased after the first round vote
on Sunday. Yet investors remain wary of surging
anti-establishment sentiment that could destabilise the status
quo in Europe.
In particular, Italy is seen as a next potential flash point
as opinion polls show the anti-establishment 5-Star Movement,
which is calling for a referendum on the euro, is likely to win
Many economists also expect the ECB to signal later this
year its willingness to reduce its bond purchases, currently
running at 60 billion euros per month.
Japanese insurers bought a record 7.76 trillion yen ($70.5
billion) of foreign bonds, including French and other European
bonds, in the last financial year ended in March, to seek higher
returns than those on negative-yielding Japanese government
They are averse to exposure to foreign exchange
fluctuations, so they use currency hedging on a large part of
their foreign bond investment.
Shigemoto said the firm still thinks currency-hedged foreign
bonds appear attractive compared to JGBs but added that it will
look to their yield levels closely to make investment decisions.
The core firm of Dai-ichi Life Holdings, Japan's
second largest private life insurance group, plans to increase
its holdings of foreign stocks, expecting firm economic growth.
That scenario could change, he added, if U.S. President
Donald Trump cannot deliver the tax cuts and infrastructure
spending he has promised.
The current levels of 10-year U.S. Treasuries around 2.3
percent still reflect hopes for Trump's stimulus, Shigemoto
"If expectations of his stimulus completely disappear, then
we are not going to buy stocks or buy foreign bonds without
currency hedging," he said.
The firm also plans to further diversify its assets by
increasing investments in alternative assets such as private
equity and real estate.
(Reporting by Hideyuki Sano; Editing by Simon Cameron-Moore)