Japan's retail investors continue to favour rupee

Japanese retail investors continue to keep their faith in the Indian currency, as is evident from the rising volume of bonds that are getting issued with the rupee as the underlying in the land of the rising sun.

Issuances of Uridashi bonds in rupee so far this calendar year has crossed Rs 6,300 crore, against Rs 5,300 crore in full calendar 2015. In calendar 2014, the issuances were a mere Rs 907 crore and even less in the years before that.

Uridashi bonds are the moniker given to any bond that is issued to the retail investors of Japan. These bonds can be issued in various currencies, but the preferred ones are of those coming from a high-interest-rate economy.

 As Japan struggles with near-zero interest rate, investors are looking at an opportunity to invest their money with anyone offering positive interest rate. In addition, Japanese investors are betting the underlying currency will appreciate so that they can gain on the exchange rates, too. The bonds are neither issued by Indian companies nor do the funds come to India. It is more of a currency market bet, where the rupee is treated as an exotic currency.

Typically, the issuers include major global banks such as HSBC, Deutsche Bank, BNP Paribas and the finance arm of niche lenders, including International Bank for Reconstruction, or World Bank, a big issuer in the market. Coupled with masala bonds, or rupee denominated bonds issued overseas by Indian companies, the surge in Uridashi bonds will help internationalise the Indian rupee, says a domestic fund manager who deals with Japanese investors, but doesn’t participate in Uridashi bond issuances.

 “One interesting thing about Japanese investors is that they are not bothered about the capital, but they are more interested on the dividend and the interest earned on capital deployed,” says the fund manager who was not authorised to speak to the media.  

According to the fund manager, who frequently visits Japan, the country got enamoured by India after the present government took charge. “Japanese investors go by impression, which they hold for a long time. Once an impression is made, it is easier to sell stuff. And their impression about India turned very favourable after Narendra Modi became Prime Minister,” he adds.