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.