Investors cancel Enron-exposed MMFs worth over 1 tril. yen.
Investors on Thursday canceled more than 1 trillion yen in money management funds (MMFs) incorporating Euroyen bonds of U.S. energy giant Enron Corp., brokerage houses said Friday.
At some MMFs, the value of cancellations for Friday eclipsed that of Thursday, they said.
''The balances of some outstanding MMFs are likely to more than halve,'' a brokerage official said.
The rush of cancellations was triggered by news that Enron is preparing to file for court bankruptcy proceedings.
MMFs, the Japanese equivalent of money market funds in the United States, draw investors seeking stable returns. They are designed to invest more than 50% of collected funds in bonds, with the remainder invested in short-term financial instruments such as certificates of deposit.
Although MMFs do not carry any guarantee that the principle will be fully refunded if it falls below par value, industry officials have long described them as an investment tool whose safety levels are next only to deposits.
The burgeoning wave of cancellations has begun to submerge MMFs generally, including those that do not incorporate Enron bonds.
An official at a midsize brokerage house said, ''Investors' confidence in the attractiveness of MMFs as a whole is now being rocked.''
Five types of MMFs incorporate Enron bonds. They have been sold by four financial firms, including Nikko Asset Management Co., UFJ Partners Asset Management Co. and Sumisei Investment Trust Management Co.
Nikko Asset Management had 2.7 trillion yen worth of outstanding ''Nikko MMFs'' as of Wednesday. But investors appeared Thursday alone to have taken procedures to cancel more than 1 trillion yen worth of the firm's MMFs.
On the day, UFJ Partners received cancellation applications for 61.7 billion yen worth of ''UFJ Partners MMF'' in addition to similar applications for 36.7 billion yen worth of ''Universal MMF,'' company officials said.
Enron's financial troubles became public knowledge in early November. Corporate investors scrambled to cancel MMFs quickly while individual investors have started to do so over the past few days.
Affected asset management companies need to sell assets such as bond holdings, industry analysts said.
If the balance of a portfolio in an MMF dwindles too steeply, it makes it hard for an asset management company to go on managing MMFs, they warned.
Earlier in the day, Financial Services Minister Hakuo Yanagisawa said he regrets that MMFs exposed to Enron have fallen below their par value.
The Investment Trusts Association of Japan said Thursday that MMFs offered by four Japanese asset management companies have fallen below their par value of 10,000 yen due to the inclusion of the Enron Euroyen bonds.
Yanagisawa noted the brokerage houses prepared sufficient funds to meet growing demand for cancellations and he commended such moves as appropriate.
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|Comment:||Investors cancel Enron-exposed MMFs worth over 1 tril. yen.|
|Publication:||Japan Weekly Monitor|
|Date:||Dec 3, 2001|
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