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.
We have a non-consensus, but completely sound call for a more aggressive Fed, whereas we expect the ECB and BOJ to maintain their current aggressive easing program.
Despite good global economic growth, other commodity prices will likely remain quite flat in our view, partially due to a stronger USD.
We calculate that equity valuations are at fair levels and that stocks can grow along with earnings.
Although the recent bond market sell-off may remind the market of 2003, we don’t believe US bonds will be as badly affected. By comparing the worst US bond sell-offs since 2003, we estimate that the 10-year US Treasury yield could hit a high of 2.8-3.2% by October.
Yields of US Treasuries (USTs) rallied in May, with the 2-year and 10-year yields up 4 and 9 basis points (bps) respectively as compared to end-April levels.
The MSCI AC Asia ex-Japan returned -2.6% in May, lagging the MSCI AC World by 2.9%, in USD terms.Asian equities underperformed other Emerging Markets (EMs), particularly Brazil and Russia, which rallied sharply.
Notwithstanding a brief rebound in yen strength in mid-June, the Japanese currency has continued its weakening trend against the U.S. dollar, with the yen recently dropping to its lowest level in over 12 years.
Japan’s nominal GDP, commonly used to gauge a country’s real standard of living, has remained mostly unchanged since the 1990s following the collapse of Japan’s asset price bubble and the onset of deflation.
Real yields and inflation expectations currently suggest exceptionally low growth and low inflation far out into the future.
We expect that profit margins will expand further in coming quarters, driven by a large corporate tax cut and continued industry rationalizations that further prove that Japan's structural profitability trend continues upward.
We do not expect the recent steepening of the bund yield curve to be the beginning of a sustained new trend. Moreover, Eurozone and German economic data, albeit improving, are not sufficient to support the higher bund yields on a sustained basis.
US Treasury (UST) yields rose in April, as hopes of stabilization in the Chinese economy underpinned demand for riskier assets.
Since the Fed starting hinting at the normalization of interest rates a year ago, Asian central banks' foreign reserve accumulations - except for India and Hong Kong - have either incurred substantial losses or remained flat.
With many markets having rallied from major support levels when they were in highly oversold positions, we believe that bond markets should stabilise or rally from current levels.
Yields of the US Treasuries (USTs) traded in a relatively tight range, eventually ending higher at month-end. At 2.03%, the 10-year point on the UST curve was up 11 basis points (bps) compared to the level at end-March.
The MSCI AC Asia ex-Japan returned 7.2% in April after shrugging off initial weakness and outperformed the MSCI AC World by 2.3% in April in USD terms.
The Japanese stock market has continued to rise, punctuated by the Nikkei 225 recently closing above 20,000 points for the first time in 15 years.
We expect that Japanese pension funds will continue to shift their investments into risky assets in 2015.
Oil-producing countries have seen the largest drop in their foreign exchange (FX) holdings over the last year. In our view, Saudi Arabia can afford to handle oil prices at their current level for some time but ...
The importance of President Xi Jinping's strong leadership cannot be stressed enough. Under him China is undergoing dramatic changes. While the most thorough cleansing of state corruption is ongoing, elements of China's grand strategy are becoming more evident both domestically and on the global stage.
Prices of the US Treasuries (USTs) ended March higher, with 2-year and 10-year USTs yields closing the month 6 basis points (bps) and 7bps lower respectively.
The MSCI Asia-Pacific ex-Japan returned -0.3% in March after shrugging off initial weakness and outperformed the MSCI AC World by 1.3% in March in USD terms.
The market isn't overheating even though the Nikkei stock average touched the 20,000 level, nor do we believe that overseas markets are overheating right now.
With the dollar/yen hovering around JPY120 to the U.S. dollar, Japanese stocks have recently been showing extraordinary strength, marked by the Nikkei 225 breaching the JPY20,000 level on April 10 for the first time in roughly 15 years – a level that it retook on 22 April and has stayed close to ever since.
Defaults from Chinese companies have been on the headlines recently. First, the default of property developer Kaisa Group last Monday (20 April 2015) was expected given the challenges in the ongoing debt restructuring.
Due to the developments described in this article, there is ample room for growth at Japanese firms and much opportunity for investment success.
Given the significant proportion of real estate investment as a percentage of GDP, as well as the proportion of local government revenue generated from land sales, the property market remains a crucial driver of the Chinese economy.
The March “tankan” survey results are not expected to lead to the BOJ's further acceleration of QE.
Interest rate and foreign exchange volatility has begun to increase as the market anticipates the time when the US Federal Reserve will start to reduce monetary accommodation and raise interest rates.
In sum, there certainly are some worrisome issues, as always, but we find none of them convincing enough to prevent moderate increases in equity prices.