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 The funds' buying helped Japanese shares to rally more than 10
percent in just over a month - though one source said the buying may
come to a halt before month-end, posing the threat of a near-term
correction to the market.All three funds declined to comment on
whether they bought shares in the last two months.
The three pension funds - the Pension Fund Association for Local
Government Officials, the Federation of National Public Service
Personnel Mutual Aid Association and the Private School Mutual Aid
System - manage a combined 29 trillion yen ($284 billion) of assets.
The funds will be merged into the 129 trillion yen ($1.26 trillion)
Government Pension Investment Fund (GPIF), the biggest pension fund
in the world, in October next year.
A market source, who was briefed on the matter, said the three
semi-public pension funds transferred money to portfolio managers in
May, requesting them to finish buying up shares before end-June.
Data from the Tokyo Stock Exchange also pointed to heavy buying by
public accounts since May.
Buying by trust banks, which manage a large proportion of public
pension funds, soared to 687.3 billion yen in May, the most since
March 2009, when there was a whisper of buying by public accounts to
prop up the market as share prices hit 25-year lows.
Trust banks' stock-market buying continued in June, investing an
additional 200 billion yen in the first two weeks - a sea change
from their persistent selling when the market began rallying on
hopes of Abe's aggressive stimulus.
From mid-November 2012 to mid-May 2013, during which Japanese share
prices gained almost 80 percent, trust banks sold shares in all but
one week, selling almost four trillion yen worth.
Market players say trust banks' buying was a major driving force
behind a rally in Japanese shares since late May.
After hitting a one-month low on May 21, the Nikkei average has
risen almost 10 percent and the broader Topix index almost 11
percent so far.
That gain compared with 3.8 percent rise in the U.S. S&P 500 index
and 1.3 percent rise in ex-Japan Asian-Pacific shares.
The pension funds' stampede into shares reflects Abe's strong push
to make public pension funds buy more stocks to spur economic growth
by channelling money into risk assets, a major plank in his "Abenomics"
platform to boost growth.
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Against this backdrop, the country's biggest retirement investor,
the GPIF, is widely expected to increase its allocation to stocks.
Abe earlier this month called for the GPIF to speed up its asset
allocation review. Many market players expect the final decision
later this year, with several speculating the fund has already
started moving funds into shares.
Currently the GPIF targets 6 - 18 percent of its assets to Japanese
stocks and 52 - 68 percent to domestic bonds, but market players
expect the stock allocation target could be raised to a range around
20 percent.
As of March last year the three semi-public funds held 3.5 trillion
yen in domestic shares, compared to 5.8 trillion yen if they were to
allocate 20 percent of their funds to stocks.
Compared to the GPIF, two of the three smaller pension funds have a
much lower allocation to stocks, suggesting they will need to
sharply increase their holdings of shares as the planned merger in
2015 approaches."It would not be a surprise if pension funds other
than the GPIF are changing asset allocations now," said Kenji Abe,
chief equity strategist at Citigroup Global Markets Japan.
($1 = 102.0500 Japanese Yen)
(Editing by Eric Meijer)
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