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Japan’s pension fund to diversify

By Song Shengxia (Global Times)

08:05, May 09, 2012

Japan's public pension fund, the world's largest, plans to invest in the stock markets of emerging economies including China possibly in June, a move analysts said yesterday underlines Japan's confidence in China's ongoing stock market reform and could provide experience to China in its drive to get its pension fund invested in the stock market in the future.

Japan's Government Pension Investment Fund (GPIF), which oversees 108 trillion yen ($1.3 trillion), will start investing in emerging market stocks, including Chinese stocks, possibly in June. It concluded "that stock markets in emerging economies have grown more attractive as investment targets," the Mainichi, a daily newspaper in Japan, reported yesterday, citing an unnamed source.

The fund had invested some 10 percent of its total pension reserves in foreign stocks, mostly in developed countries, at the end of last year and plans to launch emerging stock market investment without changing the percentage share, the report said.

Takahiro Mitani, president of the fund, was quoted last month by Bloomberg as saying that the fund had decided on the managers who will handle the investments and was in the process of setting up accounts in emerging markets including China, declining to name the managers.

"The plan indicates that Japan is now facing increasing pressure of an aging society and looking at ways to maintain and increase the value of the pension fund to reduce the burden on young taxpayers," Yang Yansui, director of the Research Center of Employment and Social Security at Tsinghua University, told the Global Times yesterday.

"It also shows that Japan has confidence in China's economy, which they believe will achieve sustainable growth instead of heading for a hard landing. China's new stock market regulations released recently have also reinforced the confidence of Japanese investors in China's stock market," she said.

The China Securities Regulatory Commission (CSRC) announced a slew of confidence-boosting regulatory measures for the stock market over the May Day holidays, including reducing transaction fees for trading on the Shanghai and Shenzhen stock exchanges and requiring issuers to disclose additional, detailed information if their IPO price-to-earnings (PE) ratio was more than 25 percent higher than the average PE ratio of their listed peers.

"Overseas pension funds have long been interested in China's capital market and have invested in it mainly through China's qualified foreign institutional investors (QFII) scheme," Xie Shikun, vice director of the International Department of the CSRC, told the Global Times.

The CSRC announced last month it would raise the quotas for QFIIs to $80 billion from $30 billion, which analysts said would attract more foreign institutional investors including pension funds to the Chinese stock market.

So far six foreign pensions including Canada's Caisse de Depot et Placement du Quebec and Korean National Pension Service have obtained QFII status in China with a total quota of $750 million, the CSRC said Monday.

"Foreign pension funds' operation overseas could lend experience to China as the country intends to get its own pension fund invested in the stock market in the future," Xie said.

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