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To: Alex who wrote (22040)	10/21/1998 7:36:00 PM
From: goldsnow	Respond to of 116764

Japan insurers seen sticking with U.S. assets 06:00 a.m. Oct 21, 1998 Eastern By Reed Stevenson TOKYO, Oct 21 (Reuters) - Japan's life insurers have had their fingers burned by the dollar's dramatic plunge, but pressure to maintain returns means they are likely to hold on to their U.S. Treasuries, analysts say. And, in the quest for high yields, the traditionally conservative insurers have little choice but to turn to riskier credit instruments such as domestic corporate bonds. ''It's desperation,'' David Threadgold, head of research at ING Barings in Tokyo, told Reuters Television. ''Riskless assets at home are not going to provide the return that is needed to back policies, so some form of risky asset has to be considered.'' For the last 2- years life insurers had a sure bet -- a strengthening dollar against the yen, and widening yield spreads between U.S. Treasuries and Japanese government bonds (JGBs). Since the dollar's dramatic 25 percent slide from August levels, Japan's largest block of institutional investors has chosen to hedge their dollar holdings instead of repatriating the money. ''Since Big Bang deregulation, Japan's life insurers did not adequately hedge their positions in U.S. assets,'' said Akio Yoshino, director of investment at Credit Suisse Asset Management. ''Now they are hurrying to cover their positions.'' By some estimates, insurers had employed a dollar hedge ratio of between 10 and 30 percent -- now industry watchers expect that to climb to at least 70 percent. In order to make up for the dent that increased hedging costs will make on their returns, life insurers are expected to shift portfolio weightings into domestic corporate bonds. Such a shift is unavoidable, says Hiroshi Yamamura, head of Nippon Life Insurance Research Institute. ''If we try to avoid risk by hedging, that means no risk for no return, so accordingly we have to buy (corporate bonds).'' In order to preserve returns, life insurers have lowered their low-yielding domestic equity and bond allocations by nearly one percent so far this year, according to the Japan Life Insurance Association. Most of that money went into U.S. Treasuries as well as into riskier domestic bonds. Yamamura said the situation is further complicated by the deteriorating creditworthiness of corporate issuers, and a lack of clear direction for the dollar. The yen stood at 116.15 to the dollar in late trade on Wednesday, compared with 136 at the beginning of October. At the start of the Big Bang deregulation in April, most life insurers had forecast a range for the dollar of between 120 and 135 yen. Some say that forecast may still be viable. ''My guess is that we've seen a bottom for the dollar at 111 yen,'' said Eishi Wakabayashi, who runs a consulting firm advising U.S. hedge funds and Japanese institutional investors. ''We might test that again, but we'll see the dollar trade between 120 to 125 yen until mid-1999.'' Japanese investors may be giving up a dollar-buying opportunity that could revitalise their portfolios, he said. Yamamura of Nippon Life Insurance Research Institute said the dollar's sudden reversal has made Japan's life insurers wary of increasing their currency exposure. ''If anything, I expect insurers to keep money at home to minimise risk,'' he said. ''And until they gain a better sense of direction, they may choose to put that money into corporate bonds, but if that's too risky they may go back into JGBs.'' ((Tokyo Newsroom +81-3 3432 8022 tokyo.newsroom+reuters.com)) Copyright 1998 Reuters Limited. All rights reserved. Copyright © 1994-98 Infoseek Corporation. All rights reserved.

To: Alex who wrote (22040)	10/22/1998 6:20:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116764

Brazil Awaits Election Outcome Thursday, 22 October 1998 S A O P A U L O , B R A Z I L (AP) PRESIDENT FERNANDO Henrique Cardoso's efforts to repair the largest economy in Latin America may depend on the outcome of this weekend's gubernatorial elections. Cardoso wants to impose tough measures that would slash government spending and impose new taxes to try to halt the slide in Brazil's economy and restore investor confidence. But his plan, expected to be unveiled next week, must be approved by Congress, and state governors have enormous sway over local delegations. "The influence governors have on their congressional blocs is overwhelming," said University of Sao Paulo political scientist Eduardo Kugelmas. Brazil has been caught up in the financial turmoil that began more than a year ago in Southeast Asia. As wary investors have fled its financial markets, Brazil's foreign reserves have fallen below $50 billion from $70 billion at the end of July. On Sunday, voters return to the polls for runoff elections in 12 states and in the Federal District of Brasilia. The outcome will likely determine how successful Cardoso is in getting Congress to approve his economic program, which is aimed at trimming the budget deficit. New income, fuel and bank transaction taxes are expected to be proposed. Kugelmas said opponents of the president stand a good chance of winning in four large states - Sao Paulo, Minas Gerais, Rio de Janeiro and Rio Grande do Sul. "If they win, the president will face a tough uphill battle," he said. Cardoso needs the governors' support not only in influencing the congressional delegations, but also in holding down their own spending. "The problem is that none of the candidates in Sunday's elections ... wants to be identified with unpopular austerity measures," said Kugelmas. "So they promise to spend more money on schools, hospitals and public work projects." Sao Paulo, Brazil's industrial and financial powerhouse, is perhaps the state most critical to the success of Cardoso's austerity plans. With more than 34 million inhabitants, nearly equal to the entire population of neighboring Argentina, it alone accounts for more than one-third of Brazil's economic output and 70 of the 513 congressional seats. While incumbent governor Mario Covas, a Cardoso ally who is seeking re-election, has committed himself to the austerity plan, Covas opponent Paulo Maluf is a question mark. "If Maluf wins, he will use his victory as a launching pad to the presidency in 2003," Kugelmas predicted. "And that means he will try to stay as far away as possible from any austerity measure."