Continued easy monetary policy in Europe and Japan will be supportive for global interest rates, but the case for further limited rate hikes in the US remains in place for 2016.
Our oil experts in London and New York update their bullish views in January with new facts, while retaining their positive intermediate-term view on oil prices.
Our Chief Strategist in Japan explains why Japan’s government debt situation is sustainable.
Our global rates and currencies strategist in Australia lays out his dovish Fed scenario as an alternative to our house view. In it, he expects the Fed to wait until September or later to raise rates, and states his case that the Fed’s actions do not affect US bond yields.
We believe it is time to reassess market attitudes towards liquidity. We may have to start moving towards a model where investment horizons and liquidity expectations are more appropriately matched to the asset classes being invested in.
Our London-based portfolio manager, Simon Down, and his colleagues review the refugee crisis that is turning European politics into a "hornets' nest."
Our two leading Global Emerging Market debt experts, both based in London, weigh the possibilities of a sustained upturn in this long-suffering asset class.
Asia ex Japan (AxJ) equities declined by 0.9% in USD terms in April, largely on the back of currency weakness. Oil markets reached their highest levels since last November, while activity data in China improved.
Our Chief Global Strategist explains the reasons why there is too much unjustified pessimism about Abenomics.
Our Asian currency expert discusses the potential ramifications of the increasing CNY-orientation for Asian currencies.
What is more important for credit spreads in the current environment: the fundamentals or central bank actions? Our research suggests that since 2010 the answer has been central banks and, in particular, the US Federal Reserve.
The global advertising industry is undergoing a rapid transition. Advertisers are currently under-allocating to mobile advertising, and there are some companies that are well placed to take advantage of this trend.
US Treasuries ended mostly higher in March, while risk assets rallied. Although US labour data mitigated fears of a recession, the Federal Reserve (Fed) now expects to raise interest rates twice this year, down from its previous projection of four rate hikes.
Asia ex Japan equities rebounded in March, with the MSCI Asia ex Japan index returning 11.2% in USD terms. Sentiment was driven by a combination of dovish rhetoric from the US Federal Reserve (Fed) and easing by the European Central Bank (ECB).
For the next 12 months, we are quite positive on performance prospect for global credit, singling out five investment themes.
Since 2011, Brazilian assets have re-priced to the downside. Given the size of the adjustment – both in commodities and assets – the question is whether Brazil is now presenting attractive investment opportunities.
Nikko Asset Management's Global Investment Committee met on March 29th and updated our intermediate-term house view on the global economic backdrop, central bank policies, financial markets and investment strategy advice.
We expect June and December Fed hikes, but only mild further easing ahead for the BOJ and ECB. Meanwhile, we expect oil prices to creep higher through 2016 despite the stronger USD due to relatively firm economic developments in China and the G-3.
We expect that global equity and bond investing will be positive for Yen based investors due to Yen weakness, but for USD based investors, we are taking only a neutral stance on global equities due to a cautious forecast for US equities, whereas we are positive on Asia-Pac ex Japan, Japan and Europe. Meanwhile, we are moderately negative on bonds in each region when measured in USD terms, so we underweight them.
Our Singapore-based Fixed Income Portfolio Manager details the reasons for ASEAN’s recent rebound and why such should continue.
Although the current polls do not indicate a clear majority outcome, in this piece we will examine some of the issues that may cause sentiment to shift towards a Brexit, and what the UK leaving the European Union might mean for the UK and EU economies post breakup.
While a recession in the US is not our base scenario, the impact of such an event on credit exposure is worthy of consideration. In our historical analysis we've found that the driver of past recessions can provide important insight into which credit maturities are most attractive.
US monetary policy grows less independent as 2016 unfolds and risks to global growth abound in a rebalancing China, a deflationary struggle in Europe and whispers of a Brexit.
2016 began in complete panic, with risk assets including emerging markets (EMs) selling off deeply through the first few weeks of the year.
Asia ex Japan equities edged lower in February, with the MSCI Asia ex Japan index contracting 0.9% in USD terms. Concerns over US economic growth and a Federal Reserve (Fed) perceived to be on hold drove a decline in the dollar.
5-year and 10-year US Treasuries (USTs) yields ended the month lower, at 1.21% and 1.74% respectively. Cautious sentiment around falling oil prices and the prospect of a delay in US Federal Reserve interest rate increases supported US Treasuries (USTs) over the month.
Our global strategist sheds light on how corporate profit margins are reflecting the continuing improvement of corporate governance in Japan.
Our Global Credit staff in London detail their rationale behind concentrating on service sector exposure globally.
Our global equities team in Edinburgh explains their views on the prospects for their asset class.
In 2015, the US Federal Reserve began the process of interest rate normalisation. Short-term bonds underperformed long duration bonds, on expectations of the ongoing US economic recovery remaining weak, and US inflation being anchored at current low levels.
Asia ex Japan equities finished sharply lower with the MSCI Asia ex Japan Index contracting 7.6% in USD terms month-on-month (MoM), behind MSCI AC World Index.
2-year and 10-year US Treasuries (USTs) yields ended the month lower, at 0.78% and 1.92%. Concerns that China could be embarking on a devaluation path curbed investors' risk appetite and supported demand safe-haven assets.
This policy change by the BOJ is a positive in terms of maintaining and strengthening the inflation expectations that have begun to flower.
Unfortunately for the soundness of the sleep among BOJ-watchers, Mr. Kuroda believes that surprising the market is the best way to achieve his intended result.
Our London and US analysts review oil prices from the supply and demand angle and they note that global demand growth remains high while global supply is narrowing, indicating that oilfs price swoon could be over.
Our Singapore Multi-Asset and Equity team analysts cover oil’s swoon using a bit of humor, but the clear-cut conclusion is of great importance.
Our Chief Global Strategist regards Japan positively in the global-macro context and predicts that Japanese equities will outperform global equities in the first half of 2016.
Our Chief Investment Officer in Japan details the many reasons for optimism on Japanese equities in 2016
Our Singapore fixed income team expounds on the outlook for this clearly globally important factor.
The current depreciation trend of the RMB against USD should be seen as a broad-based depreciation of the RMB and not bilaterally to the USD.
2015 has been a tumultuous year with a plethora of risk events spurring significant volatility across most asset classes.
In early 2016, hedge fund Nevsky Capital decided to call it quits after 15 years of successful asset management. One of the reasons for the closure is that since the global financial crisis (GFC), emerging markets (EMs) are breaking away from the transparent 'Washington Concensus' model and are now prone to much less predictible nationalistic policies.
In USD terms, the MSCI AC Asia ex Japan Index finished 0.5% lower for the month, while the MSCI AC World Index closed 1.8% weaker.
2-year and 10-year US Treasuries (USTs) yields ended 2015 higher at 1.05% and 2.27%. These come after the US central bank raised ist interest rates and pledged a gradual pace of increases.
There are many concerns about Abenomics losing its power to reform the economy, but our Chief Strategist in Japan, Naoki Kamiyama, shows that the major developments in tax reform prove that Abenomics is alive and well.
James Eginton provides his insights on the economic transition in China following a recent research trip to the region. The transition from a reliance on infrastructure investment to consumer spending - perhaps the largest the world will ever see - has significant implications for global growth.
John Vail reflects on the Fed decision and the path forward. The Fed was even more dovish than apparent in the headlines.
Nikko Asset Management's Global Investment Committee met on December 8th and updated our intermediate-term house view on the global economic backdrop, central bank policies, financial markets and investment strategy advice.
We only expect mild further easing ahead, especially as the ECB does not wish to cause a rupture while the Fed is hiking rates.
We forecast that Asia Pac ex Japan, Japan and Europe will outperform in the next six months, while the US should underperform and, thus, deserve an underweight stance vs. all other regions.
Our investment management teams have again come together to update their views given new developments in India.
US Treasuries (USTs) yields ended the month higher. October non-farm payrolls indicated a surge in job growth, keeping the US Federal Reserve (Fed) on course for a possible rate hike in December.
The MSCI Asia ex Japan Index fell 3.4% in USD terms, underperforming MSCI AC World Index. Malaysia, being the only net commodity exporting country within the Asia ex Japan region, was the only market which proved positive returns (in USD terms) in November, aided by strong currency.
Looking forward, even though inventories were revised higher, their long depletion means they remain far too low in my view, and should continue start to rise significantly in the quarters and years ahead.
As we enter 2016, we believe the divergent monetary policy theme will continue -- with the major risk to global bond markets and Fed rate rises continuing to be Europe.
A framework agreement for the Trans-Pacific Partnership was reached in October 2015, and the governments of participant countries are working to ratify the agreement and formally launch the partnership.
With the aim of significantly liberalizing trade within the Asia-Pacific region, and thereby boosting trade and investment among the region's countries, a framework agreement for the Trans-Pacific Partnership (TPP) was reached in 2015.
Inbound consumption by overseas visitors to Japan continues to grow. For the nine-month period from January to September 2015, such consumption totalled a cumulative ¥2.6 trillion (approx. US$21.7 billion), which already represents a higher amount than that for all of 2014.
The IMF's decision to include the Renminbi into the SDR is a major push for the RMB to become one of the world's major reserve currencies.
Our lead Australian fixed income portfolio manager discusses her intermediate-term outlook for the bond market “down under.”
Once again, as has long been our view, disappointing macro-data should not worry investors in Japanese risk assets very much at all.
Prices of the US Treasuries (USTs) ended the month lower. Risk-on sentiment prevailed for the most part of October, favouring risk assets over perceived "safe-haven" instruments.
The MSCI AC Asia ex Japan Index rose 8.0% in USD terms, broadly in line with MSCI AC World Index. All Asia ex Japan currencies except the Philippine Peso strengthened against the US dollar in October.
Developed and emerging markets in Asia ex-Japan have clearly been under tremendous pressure in recent months, including redemptions of more than USD 50bn from the region in September, the heaviest ever witnessed.
We update our views on whether ECB QE has had a positive effect on corporate earnings.
There are many reasons for the BOJ to defy consensus expectations for more easing.
US Treasuries (USTs) registered gains in September. Yields initially trade in a tight range, but subsequently jumped mid-month, in anticipation of the announcement from the US Federal Reserve (Fed).
The MSCI AC Asia ex Japan Index was down 1.8% in USD terms in September which masked the volatility where the markets oscillated within a wide range of 10%.
There is an admirable effort to improve the female participation rate, but it is too early to judge whether the measures will have a major effect.
A better supply/demand balance in Europe, outperformance of “high yield“ globally, positive event-risk in the telecom sector and opportunities in local currencies, as well as other credit related investment themes, all present interesting opportunities for generating positive returns, even in a challenging environment.
Our Nikko Asset Management fixed income experts, led by Simon Down, discuss the prospects for commodity currencies.
In our view, the G-3 economies will fare reasonably well, and basically match the current consensus in the next few quarters; however, there will be significant challenges for each region.
For the time being, we are not estimating a date for reducing the Fed’s balance sheet, but a 2Q16 initiation seems quite logical at this stage.
Although we expected G-3 bond yields to rise, they did so less than we predicted in our June meeting. We expect yields to rise moderately further for the next two quarters.
Our forecasted macro-backdrop scenario has mixed ramifications for global equities, with the US declining but most other regions rising, and it is likely to be very volatile ride
Markets and economies are still being dictated to by unprecedented levels of monetary stimulus. We believe in building a portfolio of companies that are more likely to flourish in the growth environment beyond 2015.
US Treasury (UST) yield curve, along with other asset classes, experienced volatile swings in August. The Chinese central bank’s announcement that it would modify the approach to setting the CNY fixing midpoint effectively weakened the currency against the USD.
Asian equities fell 9.8%, underperforming the MSCI AC World Index by 3.2%, in USD terms. This marked the worst monthly performance for MSCI Asia ex-Japan Index since May 2012.
Looking at how Japanese companies fared with their April-June quarterly earnings, we can see that automobile manufacturers and major electronics producers posted large profit growth on the back of the weak yen and strong sales in the North American market.
We explain how Abenomics is the "icing on the cake" of corporate governance improvement over the last decade.
The internet revolution is coming to the financial sector, addressing inefficiencies in current system and business models. In China’s case we are witnessing a combination of financial liberalisation with an internet revolution in the financial sector.
Even though the current term premium on US Treasuries seems too low, it is unlikely to rise significantly unless offshore bond yields start to rise.
As has long been our view, disappointing economic data should not worry investors in Japanese risk assets very much at all.
While RMB weakness will likely persist for a few months, we don't expect the currency to devalue more than 10% versus USD and we maintain our confidence that the currency will be included into the IMF SDR basket in a year from now.
US Treasury (UST) yield curve bull flattened in July, as yields of short-dated USTs rose on Federal Reserve (Fed) Chairperson Janet Yellen’s statement that interest rates are likely to rise later this year while the yields of longer-dated USTs fell on the weakening inflation outlook.
Asian equities fell 6.3%, underperforming the MSCI AC World Index by 8.1% in USD terms. MSCI EM Asia Index was down 6.9% in USD terms, its worst monthly performance since May 2012.
Spreads in Asian corporate high yields (HYs) have been impacted by recent market volatilities. Risk aversion ruled the market after the surprise change in RMB fixing rule which led to concerns on the weakening growth in China and its impact on the emerging markets (EM) countries.
After the China devaluation, Asia currencies and equities broke down – in effect, catching down to some degree to Latin America, Europe, Middle East and Africa, which had already been significant underperformers.
We will be watching to see how companies respond this year to the Corporate Governance Code, specifically the twin issues of selling cross-shareholdings and improving capital efficiency.
India is a key market to watch in the coming years. Our expert on India, Andrew Holland, CEO of Nikko AM's joint venture there, discusses with Simon Down of our UK fixed income team the forecast for reforms in the country, with some surprising conclusions.
What lies ahead for iron ore prices, particularly with the Chinese economy slowing and undergoing a transition away from a materials-intensive economy to a consumption-driven economy?
Like many countries that have previously refused to reform at all levels, sometimes it takes a true crisis to change.
Yields of US Treasuries (USTs) bear steepened in June, with developments in Europe dominating sentiment. The 10-year Treasury eventually ended the month at 2.35%, 23 basis points (bps) higher compared to end May levels.
The MSCI AC Asia ex-Japan fell -3.7 % in June in USD terms, lagging the MSCI AC World by 1.4%. Asia ex-Japan markets continued to give up year-to-date gains in June as the old adage of sell in May and go away continued to hold true.
The sharp equity market correction in recent weeks after a very strong run over the past year will not have a crisis-level impact to the broader economy.
The IMF has been supportive of China's attempt to be included, but has not indicated that it recommends it. Furthermore, there is a risk that most of these reforms are too new for the IMF to judge whether they are effective or sustainable.
Nikko AM Asia views the recent corrections in Chinese equities, particularly in the onshore markets, as healthy given the sharp increases in value that had occurred due to a frenzied retail market intoxicated by relatively cheap margin financing.
Nikko AM Asia views the recent market corrections in Chinese equities, particularly in the onshore markets, as healthy given the sharp advance on account of a frenzied retail market intoxicated by the relatively cheap margin financing.
Reforms have been a key element of the Chinese leadership and we foresee a continuation of policies aimed at eradicating state inefficiencies and corruption; liberalise and prepare capital markets for more competition; address labour mobility and encourage urbanisation, to name a few.
We believe the global economy should be quite firm for the next year, but not so strong as to cause inflation concerns.