Asian Pension Funds Cut Back on Stocks as U.S. and China Fight

(Bloomberg) -- Pension funds across the Asia Pacific region are limiting their stock holdings as fears mount of a global slowdown and a trade war between the U.S. and China.

Australia’s largest pension manager will cut its equities exposure over the next 12 months, moving more money into fixed income and cash. A Thai fund will avoid developing countries’ shares and bonds, and a Philippines counterpart is balking at investing in its own nation’s stock market.

The moves, disclosed in interviews and public remarks this week, add to pullbacks from stocks worldwide as tensions rise between the world’s two biggest national economies and investors eye the end of a global growth cycle. Fidelity International turned neutral on equities from overweight last month and Goldman Sachs Asset Management said it had become more cautious.

“The impact of these pension funds leaving the equity market could be very big and make the market more volatile,” Banny Lam, Hong Kong-based head of research at CEB International Investment Corp., said by phone. “It’s likely that they are taking profit right now and holding cash, and will wait for a better opportunity to buy on the dips.”

Asian Pension Funds Cut Back on Stocks as U.S. and China Fight

The looming end of the growth cycle means cutting exposure to stocks, Mark Delaney, AustralianSuper Pty.’s chief investment officer, said by phone from Melbourne. The money manager, which oversees A$140 billion ($104 billion), will cut its allocation to shares to about 55 percent from about 62 percent in the coming 12 months, with the U.S. Federal Reserve affecting the pace, he said.

“If the Fed tightens more quickly than anticipated, we may reach that target in a shorter time,” said Delaney. “If the Fed tightens as planned and global trade tensions ease, then we might stay in equities a bit longer.”

‘Very Cautious’

Thailand’s $26 billion Government Pension Fund will continue to avoid investing in developing-nation equities and bonds because of the risk of increased outflows due to global trade tensions and weakening currencies, according to its Secretary General Vitai Ratanakorn.

“We are very cautious as global financial markets will remain extremely volatile with trade tensions and exchange-rate movements,” Vitai said in an interview at his office Tuesday.

Meanwhile, in the Philippines, the largest pension fund, Government Service Insurance System, has “no appetite” to invest in equities at home after a market slump, President Jesus Clint Aranas said at a forum in Manila. The country’s benchmark index is down 14 percent this year as investors flee emerging markets.

“It doesn’t make sense for me to plow it in a losing market,” Aranas said.

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