Japanese investors are worried about China and Federal Reserve’s tapering program, tells a new investment survey. The study was conducted by Eurkeahedge in collaboration with AIMA Japan (Alternative Investment Management Association). China came up as the biggest concern for this year due to its dismal GDP numbers and an onshore bond default. Further instability in Asia’s largest economy could add pressure to the surrounding region, a worry that prevailed among Japanese investment managers polled in the survey. While decreased QE in the U.S worried Japanese investors, peripheral eurozone debt appeared to be the cause of little concern in Japan.
Other than these macro fears, increased regulatory constrictions are also worrying the Japanese investors. The results mentioned increased inspections by the Japanese FSA and compliance to the Dodd-Frank act as the most acute concerns of the region.
More than half of the respondents polled by the survey managed over $1 billion and nearly 80% were based in Japan.
Abenomics makes the favorite
Despite the bumpy start to 2014, investment managers in Japan are optimistic about this year. Unsurprisingly Abenomics was a favorite among the polled, 88% categorized the policy as a success based on the effects it had in last year. Expectations are also high for 2014 as well, 72% of this group said that Abenomics will be fruitful in this year as well. Giving an opinion on the three arrows of Japanese monetary policy, 85% said that monetary easing had the largest impact on Japanese economy.
There are also high hopes for the stock market, 72% of the polled said that Nikkei 225 will close above 15,000 this year. Of these, more than half expect it to go over 20,000 at the end of 2014.
Sentiment regarding yen’s depreciation is evenly spaced. 44% of the investors said that the JPY/USD will trade between 100-105 range whereas 48% thought yen would go below 105 by the end of the year. When asked about the JGB 10-year yield, 69% expected it to remain below 1% for 2014, and 68% predict that Japanese central bank will continue its policy of buying JGB at the same level.
Japanese investors to expand in Long/short equity and event-driven
Planned investment approach for this year was also unsurprising. Hedge funds’ darling strategies, long/short equity and event-driven continue to be the most-liked. Investors planned to increase their allocations in long/short equity and event-driven by 46% and 34% respectively. The results of the survey said that respondents were planning to decrease exposure in CTA/managed futures, macro and fixed income.