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INTERVIEW-Japan's Mitsui Sumitomo Insurance to boost investment in corporate debt
October 16, 2017 / 9:16 AM / 2 months ago

INTERVIEW-Japan's Mitsui Sumitomo Insurance to boost investment in corporate debt

TOKYO, Oct 16 (Reuters) - Japan’s Mitsui Sumitomo Insurance Co plans to increase investment in risky assets such as foreign stocks and debt by 30 billion yen ($268.36 million) in the second half of this financial year, a senior company executive said on Monday.

The main arm of MS&AD Insurance Group Holdings has raised the total such investment to 90-100 billion yen for the year, up from an initially planned 60-70 billion yen, Tomonori Mano, manager of the investment planning department at Mitsui Sumitomo, told Reuters in an interview.

Foreign stocks and debt, and private equity fall under the category of risky investment.

Although investors were concerned about geopolitical risks such as tensions between the United States and North Korea during the first half, “the relatively stable market allowed ourselves to have enough funds, so we moved forward the investment schedule,” Mano said.

The insurer, which had 6.777 trillion yen in total assets as of March 2017, does not plan to aggressively increase investment in currency-hedged foreign government bonds due to rising hedging costs. Instead, it will invest in foreign corporate bonds and foreign exchange traded funds, Mano said.

Of the about 35 billion yen worth foreign bonds the insurer invested in the first half, more than two-thirds were government bonds without currency hedging and the rest were exchange-traded funds (ETFs).

Mitsui will also invest 30 billion yen in foreign ETFs for the second half.

The insurer plans to keep its domestic bond assets steady this year as Japanese government bond yields have kept low under the Bank of Japan’s negative interest rate policy.

The insurer plans to invest in domestic corporate bonds which can generate returns. In April, it had planned to invest 100 billion yen in corporate bonds, and has already invested more than half of that amount by end-September.

It will continue to invest in corporate bonds in the second half as well, Mano said.

Mitsui Sumitomo Insurance plans to cut holdings of domestic stocks as it is in the final year of a four-year plan to reduce such exposure by a total of 500 billion yen.

Many Japanese insurers have been slowly unwinding their cross-holdings of shares, recognising the risk they pose to their financial health.

The insurer expects the 10-year Japanese government bond yield to trade between zero and 0.1 percent for the second half.

It also expects the dollar to trade between 110 and 117 yen and the euro to range between 120 and 140 yen during the same period.

$1 = 111.7900 yen Writing by Ayai Tomisawa; Editing by Biju Dwarakanath

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