As Asia’s best-performing stock market year-to-date, little surprise that Fubon Life intends to focus its attention on domestic shares on Taiwan's equity market.
The life insurer also plans to make a higher allocation to real estate assets, both onshore and offshore, as well as US debt in the mid-term, Fubon Life's management said during its 2020 financial results teleconference held on Wednesday (March 31).
Fubon Life increased its cash level by 40 basis points to 6% as of the end of 2020, noting that market uncertainties are likely to remain. It added that it would adjust its asset allocation further depending on market movements, although it said the overall allocation would largely stay unchanged.
As of December 2020, the life insurer allocated 64.5% of its NT$4.4 trillion ($150 billion) investable assets into fixed income and 17.1% into equities, according to its 2020 financial results.
It posted a 27.8% increase in investment income while investable assets under management grew 8.8% year-on-year.
Given growing returns from the Taiwan stock market, Fubon Life indicated that it would consider buying more valuable stocks, especially those that benefit from easing Covid-19 restrictions as well as cyclical industries. The management noted that 0.5% to 1% of its assets (approximately NT$44 billion) could be added to the local equity market this year. In 2020, domestic equities accounted for 12.1% of its portfolio.
Taiwan was Asia’s best-performing stock market as of March 30. The benchmark, Taiwan Stock Exchange Capitalization Weighted Stock Index, is up 12.4% so far this year and is running ahead of both Singapore and Thailand, according to Refinitiv data.
Source: Refinitiv; Data as of March 30
REAL ESTATE: 7% to 10%
The insurer is monitoring global interest rates and pondering moving more money into offshore bond assets from the second quarter of the year. It said that US bonds will still be the first option. They accounted for more than half (52.6%) of the company's total offshore bonds last year.
The yield on US 10-year Treasuries hit a 14-month high of 1.776% on Tuesday (March 30) as the bond market selloff continues on expectations for stronger growth and inflation ahead. Market participants expect yields to continue to rise and a stronger US dollar given the possibility of another stimulus package.
Source: Fubon Life 2020 financial results
Fubon Life did not indicate whether it would continue to reduce or increase its investment in Greater China bonds this year. This time last year, the insurer told an online conference that it had reduced its positions in Greater China to give greater emphasis to US bonds.
Index provider FTSE Russell gave final its approval on Monday (March 29) for Chinese sovereign bonds to be included in its flagship FTSE World Government Bond Index (WGBI), from later this year.
Even though Chinese government bonds are already included in index suites from JP Morgan and Bloomberg Barclays, the market expects FTSE WGBI inclusion to have a greater effect due to the size of passive flows that track it.
Real estate remains the other focus for the insurer.
It said that its current position in the asset class is 7%, but that this could rise by up to 10% of total assets going forward.
Property is expected to generally gain investor interest this year, following a subdued 2020 thanks to the Covid-19 pandemic. Total real estate investment volumes in Asia Pacific are expected to bounce back in 2021 to approximately $165 billion, about 90% of 2019 levels, according to a recent report from Cushman & Wakefield.