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Japan's pension funds to enter China

By Zhou Xiaoyuan (People's Daily Overseas Edition)

08:24, May 10, 2012

The GPIF, the operator of the public pension funds of Japan, has recently announced that it will invest in the stock markets of China, India and other emerging economies in June, with 100 billion yen of initial investment. It will increase the amount of investment after accumulating the investment experience.

Stable returns

As one of the world's largest pension funds management institutions, the GPIF manages 108 trillion yen of funds (about 1.3 trillion U.S. dollars). Among them, 70 percent of its investment assets are the government bonds of Japan and the domestic stocks, foreign bonds and foreign stocks respectively account for about 10 percent.

According to the provision of current operating system in Japan, the GPIF can only buy the stocks of about 20 enterprises of the developed countries.

The entry into the financial markets of emerging economies this time will undoubtedly break the restriction of only investing in developed countries to meet the demand of increasing pension funds and realize a diversified funds allocation.

In fact, GPIF is not the only foreign pension funds operator that has a keen interest in A-shares; some of them have invested in China's capital market through the identification of Qualified Foreign Institutional Investors (QFIIs).

Insiders said that the first reason why overseas pension funds are optimistic about the investment value of A-shares is that the A-shares have a low value of assessment and high returns due to China’s economic growth. Second, the A-shares now are at the bottom of investment and have strong attraction. Moreover, as the representative of emerging markets, the rise of China’s financial market met the need of maintenance and appreciation of overseas pension funds and decentralized investment. Especially as a long-term investment, overseas pension funds need to spread risk and obtain stable returns relying on diversified asset allocation before the Europe and the United States get rid of financial crisis. Investment in A-shares market will no doubt get more stable returns.

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