Japan fund managers raise allocations to U.S. stocks and bonds in August

By Shinichi Saoshiro TOKYO (Reuters) - Japanese fund managers continued to increase the proportion of shares in their model portfolio allocations in August, particularly of U.S. equities, as they bet on a steady global recovery and signs of growing strength in the world's largest economy. The survey of eight Japan-based fund managers, polled between August 18 and 22, also showed they increased their allocations of U.S. bonds, which have seen some safe-haven buying amid heightening geopolitical risk. The overall allocations to equities rose to 45.5 percent in August from 44.8 percent in July while allocations to bonds were unchanged from the previous month at 48.5 percent. In the other three small categories, the fund managers cut property but left cash and alternative assets unchanged. "While geopolitical risk may cause some turbulence, equities are expected climb steadily, supported by solid corporate earnings, and the sense they provide a bargain in terms of valuation and U.S. economic recovery," said Yuichi Kodama, chief economist at Meiji Yasuda Life. Within the equity portfolio, fund managers raised weightings on U.S. shares to 29.4 percent from 27.8 percent in July and also upped Japanese shares to 40.0 percent from 38.5 percent. They trimmed eurozone shares to 14.3 percent from 14.4 percent. Wall Street shares have continued rallying to record highs recently while Tokyo's Nikkei <.N225> reached a six-month peak over the past month. Within bonds, fund managers continued to be attracted to relatively higher yields in the United States compared to Japanese and euro zone bonds. They raised U.S. weightings to 31.0 percent - highest since November 2011 - from 27.6 percent while cutting the euro allocation to 21.0 percent from 22.8 percent. The weightings on Japanese bonds were also cut to a four-year low of 32.0 percent from 36.2 percent as the 10-year Japanese government bond yield dipped below 0.5 percent . Euro zone bond yields have traded around record lows as market participants became increasingly convinced that weak euro zone growth and inflation would push the European Central Bank to implement a broad-based asset purchase programme. Euro zone benchmark German 10-year yields hit a record low of 0.926 percent this week, and lower-rated Spanish, Italian and Portuguese bond yields also all hit fresh record lows. (Editing by Eric Meijer)