Nikko Asset Boosts Equity Weighting, Sees Good Value

By Patrick Rial

Oct. 20 (Bloomberg) -- Japan's Nikko Asset Management Co., which manages $118 billion in assets globally, boosted the target weighting of stocks in its global portfolio as the market rout has made equities cheap.

Nikko Asset lifted stocks to ``neutral'' from ``heavily underweight,'' said John Vail, the head of global strategy. The asset manager lowered its target for bonds and cash to ``neutral'' from ``heavily overweight'' as governments move to increase debt issuance to fund bailout programs.

``We do feel uncomfortable being underweight equities when valuations are so low,'' Vail said by telephone today. ``Even though there is a quite significant global recession that we are predicting, we think that markets have discounted a great portion of that.''

Nikko boosted its target weighting of Japanese equities to 36 percent of its portfolio from 32 percent. International shares were raised to 21 percent versus 17 percent previously.

Almost $30 trillion has been wiped off global stock benchmarks since the peak reached in October 2007 as the subprime mortgage crisis toppled financial institutions and spread to economies throughout the world.

The rout helped push shares on the main board of the Tokyo bourse below book value for the first time on record, a situation where shareholders theoretically would be better off if a company dissolved and liquidated its assets.

Fear and Greed

First section shares traded at 0.93 times book value on Oct. 10 as the Nikkei 225 Stock Average slumped to the lowest level in five years. The Nikkei climbed 3.6 percent to 9,005.59 today.

Warren Buffett, the world's richest man, said in a New York Times editorial last week he is buying U.S. equities, following the maxim of ``be greedy when others are fearful.''

Last week, governments in the U.S. and Europe provided $2 trillion to bail out troubled banks and boosted deposit guarantees to soothe concerned individuals.

``Government policies enacted so far have been enough to make sure that the worst of the panic is behind us,'' said Vail. ``We feel quite confident the world will not head into a deep depression.''

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net