Japan fund managers slightly raise stock exposure, trim bonds in February - Reuters poll

TOKYO (Reuters) - Japanese fund managers slightly increased exposure to equities and trimmed bond holdings in their model portfolios in February - a month that saw strong gains developed economies' stock markets.

The survey of five Japan-based fund managers conducted between Feb.15 and 22 showed respondents on average wanted to allocate 38.5 percent of their portfolios to stocks in February, up from 37.1 percent in January.

Within stocks, the respondents trimmed their North American stock exposure to 28.0 percent in February from 30.5 percent in January and raised holdings of euro zone stocks to 11.0 percent from 8.6 percent.

The Dow (.DJI) hit record highs for 11 straight days this month, boosted by U.S. President Donald Trump's pledges of tax reforms, reduced regulation and increased infrastructure spending.

As U.S. shares began to look potentially overstretched following their prolonged rally, European equities appeared to offer greater room for further gains, though there was some caution over the forthcoming elections in France and Germany.

The pan-European STOXX 600 (.STOXX) rose to a 13-month high in February, helped by strong corporate earnings and mergers and acquisition activity.

Exposure to Japanese equities was left unchanged at 46.1 percent in February, according to the survey.

"Domestic stocks are expected to remain steady through March as corporate earnings have improved on a weaker yen and a firm U.S. economy," said Yuichi Kodama, chief economist at Meiji Yasuda Insurance.

Kodama cautioned that the yen could turn stronger due to political events in Europe or developments in emerging economies.

He also saw a risk that Japanese stocks could be dragged lower if Wall Street suffers a lengthy downturn from recent highs as investors took into account the likelihood that Trump's fiscal stimulus plans were unlikely to take effect until next year.

The respondents shaved their overall bond exposure to 55.0 percent in February from 56.4 percent in January.

Within bonds, they reduced their North American debt holdings to 28.4 percent in February from 32.3 percent in January.

The allure of U.S. bonds decreased in February with the benchmark 10-year Treasury yield pulling back from a mid-month peak above 2.5 percent to a five-week low of 2.3 percent. Factors including a fall in European debt yields and uncertainty over Trump's stimulus policies have nudged down Treasury yields this month.

The respondents increased exposure to Japanese bonds to 38.4 percent in February from 35.2 percent in January as volatility in the domestic debt market subsided somewhat after spiking at the start of the month.

They trimmed their euro zone debt holdings to 18.5 percent from 19.5 percent.

(Reporting by Shinichi Saoshiro; editing by Simon Cameron-Moore)