Russia, Eastern Europe funds lure Japan investors

[HenryTo]

Eastern European countries certainly offer attractive returns here - given (and especially) that China and India have been the most featured countries in the popular media. That being said, it looks like that the appetite for risk in Japan is still well and alive.
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Russia, Eastern Europe funds lure Japan investors
TOKYO, June 16 (Reuters) - Japan's retail investors, who have shown a strong appetite for domestic shares, are turning their sights on stock markets in Russia and Eastern Europe in a hunt for higher returns.
At least two stock funds targeting Russia and Eastern Europe are being set up for the first time in eight years this month.

One of them, the "Nikko European Convergence Equity Fund" managed by UBS Global Asset Management group, received 14 billion yen ($128.2 million) in the 10 days since subscriptions started.

The other is managed by INVESCO Asset Management (Japan) Ltd., a part of Anglo-American fund firm Amvescap Plc which INVESCO has started with 220 million yen in seed money.

"Russia's economy is growing at 6 percent while Hungary, the Czech Republic and Poland are at 3 to 4 percent, which is higher than struggling France or Germany," said Koji Wada, executive director at UBS Global Asset Management, explaining the attraction for Japanese investors.

With Japanese bank savings accounts yielding less than 1 percent, so-called BRIC nations -- emerging economic powers Brazil, Russia, India and China -- have caught the eye of Japanese retail investors, who are well known for their conservative investment stance, in recent years.

Fidelity Investments Japan estimated in a report in May that about 304.3 billion yen had flowed into Chinese equity funds from April 2002 to March 2005 and around 57 billion yen was invested in Indian funds from September 2004 to March 2005.

Japanese stock funds have also gained currency.

In particular, funds targeting companies with high dividends are growing at a fast clip as concerns about unwanted takeover bids force Japanese firms to boost their share prices through higher payouts.

Data from the Tokyo Stock Exchange (TSE) released last week showed all non-financial firms listed on the exchange had announced a total 3.2 trillion yen in dividends for the business year to March, up 25.9 percent from a year ago.

Retail investors now account for about a third of all trading on the TSE.

All in all, the assets of equity investment trusts topped 30 trillion yen at the end of May, the highest level in 14 years, according to the Investment Trusts Association in Japan.

China funds, however, appear to be falling out of favour.

The assets of China equity funds dropped 5.8 percent in April from the previous month as anti-Japan protests in China spooked Japanese investors, according to research firm Lipper, a unit of Reuters Group Plc .

A Fidelity survey of 700 investors who own equities or mutual funds and unveiled in May showed individuals were aiming for high returns through short-term strategies, often holding their investments for only one to three years.