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INTERVIEW-UPDATE 1-Asahi Life to focus on domestic bonds in second half

Chikako Mogi and Hirotoshi Sugiyama
Wednesday, 24 Oct 2012 | 8:10 AM ET

* Expects upward blip in JGB yields to offer buying chance

* Expects stable dollar/yen; yen strength not a main risk

* Seeks to further shed Japanese stock holdings to trim risk

TOKYO, Oct 24 (Reuters) - Asahi Mutual Life Insurance plans to focus on investing in domestic bonds while continuing to cut Japanese stock holdings in the six months to March 2013, as it aims for stable portfolio management, a senior official said on Wednesday.

Asahi Life plans to boost its domestic bond investment by 180 billion yen ($2.3 billion) in the October-March second half after raising such holdings by 10 billion yen in the first half to Sept. 30. It plans to further curb investment in Japanese stocks after reducing it by 60 billion yen in April-September.

``We maintain our investment strategy aiming at a stable portfolio to secure income,'' Takahiro Ono, Asahi's chief portfolio manager, told Reuters in an interview.

``We plan to primarily allocate funds to domestic bonds, given uncertain global circumstances,'' he said, noting the sluggish Japanese economy, persistent concerns about the euro zone debt crisis and worries about a slowdown in Chinese growth.

Of Asahi's domestic bond holdings, 80 percent is in Japanese government bonds and the rest in corporate bonds and others.

``Our pace of domestic bond buying slowed in the first half because of falling yields, but we basically hope to boost yen bond buying when domestic interest rates gradually edge higher,'' Ono said, adding that a 10-year JGB yield around 0.9 percent would represent a buying opportunity.

Benchmark 10-year JGB yields declined from around 1 percent at the start of the fiscal year in April to around 0.77 percent at the end of fiscal half on Sept. 30. Ono expects the 10-year JGB yield to trade between 0.7 and 1.0 percent through the end of March.

The sixth-ranked Japanese life insurer, which keeps its foreign bond holdings fully hedged, plans to shrink such holdings by 60 billion yen in the second half, after boosting them by 50 billion yen in the first half, Ono said.

The rise in foreign bond holdings in the first half was primarily in European bonds, most of which were from France, while the company kept more or less steady the outstanding amount of holdings in U.S. and Australian bonds, he said.

Ono does not see the yen's appreciation as a main risk. He expects dollar/yen to trade in a 76-82 yen range and stand around 79 yen at the end of March.

He expects 10-year U.S. Treasury yields to range between 1.6 and 2.1 percent, with a core yield of 1.8 percent.

``I expect, as a main scenario, a moderate recovery in the U.S. economy,'' he said.

Asahi Life will keep a cautious stance towards Japanese stocks, seeking to sell either when prices rise to book profits, or when prices decline to limit further losses, he said.

Ono expects the Nikkei stock average to trade in a 8,000-10,000 range during the half, and end the fiscal year near 9,500.

At the end of the current financial year, the life insurer plans to keep assets under management little changed from levels at the end of September of around 5.6 trillion yen, he said. It held assets under management of 5.9 trillion yen as of the end of March. ($1 = 79.7800 Japanese yen)

(Reporting by Chikako Mogi; Editing by Chris Gallagher)