Evolving Markets

Investment Insights by our experts and thought leaders

Happy Birthday ECB

The ECB recently celebrated its 20-year anniversary and instead of a birthday cake, DB research released a compelling chart about how different asset classes have performed over this time period.

House View: Global Economic Rebound And Equity Reflation

Despite uninspiring global equity performance in the last three months, at least for USD-based investors, Nikko AM’s Global Investment Committee continues to be positive on global equities on a one-year view, particularly those in Japan, Europe and the Asia Pacific, but remain unenthusiastic on global bonds.

Where Are We With Corporate Governance In Japan?

Japan’s corporate governance reforms have progressed slowly but surely and the recent revision of the code will add momentum for the unwinding of cross-shareholdings.

Forbes: Japan's 'Show Me The Money' Corporate Governance Update

Japanese profit margins continued roughly flat in the 1Q, but at a high plateau due to improved corporate governance over the past years. With global economic growth pushing up the top line, profits should continue to rise significantly in the quarters ahead.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

China MSCI Inclusion Has Room to Grow

The much anticipated MSCI A Share inclusion happened on 31 May 2018 and will pave the way for further internationalisation of China’s stock markets.

The Case for Private Infrastructure Investing

We believe that long-term oriented institutional investors could find investing into private infrastructure via actively managed funds an attractive investment proposition.

Thoughts From the Journey

It has often been the conversations I have had with the people along the way which I have found most helpful when it has come to making investment decisions. This article aims to tell some of their stories and how apparently chance encounters can help generate investment ideas.

Forbes: The Contours Of A China-U.S. Agreement

Recent events have shed some light on a likely China-U.S. agreement fairly soon. Key to such was Trump’s order for ZTE’s sanctions to be lightened so that it can remain in business.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

China Brands Muscle MNCs Out of Home Turf

Chinese companies are now a force to be reckoned with on their home turf – a market which used to be dominated by foreign brands. This report looks at how the change has come about and where Chinese brands are headed.

Beijing conference takeaway: It is clear that while China is set for lower economic growth this year, this decrease represents a welcome central government focus on creating a cleaner, more efficient economy.

Forbes: 2% U.S. Core Inflation Achieved Very Early

In its March meeting, the midpoint of the FOMC’s projection for the Core PCE price index did not hit 2.0% until 2019. However, it seems likely to occur in the upcoming March reading. Meanwhile, today's Core CPI already exceeded 2.0%.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

How ASEAN's 3Rs Can Overcome Trade Wars

Our portfolio manager in Singapore explains why ASEAN might well benefit from the current US-China trade tensions and how the region’s three main strengths should keep economic growth strong.

Forbes: Trump Is Going To Hate This Trade Data

Not only did the US trade deficit expand in February, it showed particularly disturbing trends regarding the Eurozone and China.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

China's Move from Factory of the World to Silicon Valley of the East

With its advantages of a vast talent pool, financing and market access, China has most of the ingredients needed to transform into the “Silicon Valley of the East”

Global Ramifications of the Eurozone’s Huge Trade Surplus

Many economists and currency analysts, after years of ignoring such “old fashioned” indicators, are now talking about the massive trade surplus that the Eurozone enjoys with the world, but in particular with the US.

Forbes: Revisions Show U.S. Industrial Mini-Recession In 2015

Actually, it has not been one long expansion since 2009, as we now can see how the slumping oil price caused a mini-recession a few years back.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

LatAm Elections: The Lure of the Left

Our London-based Emerging Market fixed income analyst predicts increased volatility ahead for Latin American markets due to the threat of Leftist election victories this year, but that pro-market reforms will still progress.

House View: Continued Global Economic and Equity Reflation

Our updated view remains positive on the global economy and equity markets even as global bond yields rise a bit further. Our SPX target remains near 3000 by year end, with impressive gains elsewhere too.

Japan’s “Show Me the Money” Corporate Governance

In my view, Japan is the only major country that is going through a structural improvement in corporate governance, and, thus, deserves special attention by global investors.

Italian Elections: More of the Same Political Dysfunction

Poor economic and fiscal policies are, and will likely be, a recurring theme in Italian politics. However, from a trade perspective, we see Italy to remain a good carry/spread trade for at least the next twelve months against a backdrop of improving GDP growth in 2018 and 2019.

Forbes: 2% U.S. Core Inflation In Sight

Today's very high Core CPI result is one more indication that inflation is rising.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Forbes: The BOJ: Kuroda Again, But What's New?

The Japanese media are widely reporting that Governor Kuroda will be reappointed, which surprises very few people. Whether he wishes to finish his new five-year term is open to question, so the choice of Deputy Governor will likely be important.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Australian Household Debt — The Economic Cost of High House Prices

Over the past 15 years Australian house prices have been on an incredible run, resulting in Australian households becoming some of the most indebted in the world. So what is the economic cost of Australia’s sky high property prices and what could it mean for property prices in 2018?

Forbes: The New Fed And Why The MBS Market Will Likely Suffer

Both Fed candidates support tapering MBS holdings faster than the current plan. This would likely raise mortgage rates and tame US housing prices, which are likely rising too fast for comfort.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

MSCI Inclusion of Domestic ‘A’ Shares is China's Grand Entrance onto World Stage

Imagine a day when "Asia ex-China" portfolios are the norm. We think this is not too far-fetched an idea.

Forbes: Why Loretta Mester Should Be Fed Vice Chair

“Even though Mester is often perceived as a hawk, she is quite centrist in the current environment.”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

2018 Japan Equity Outlook

With the Nikkei Index breaching the 24,000 mark, its highest level in 26 years, Japan appears to have put its “lost decade” of growth well behind it.

From freezing the bubble to a beautiful China

A flying visit into China post the 19th Party Congress seemed like a good idea. I got the sense that post the conference, visibility and direction over the next five years was reasonably clear. But it is more difficult to hold a similar view for 2018.

2018 Emerging Markets Outlook

Our Senior Portfolio Manager for Emerging Markets in London forecasts that in 2018, this asset class could well match 2017’s achievement.

2018 Developed Markets Outlook

For 2018 and beyond, we see a story of central bank policy normalization and foresee the global economy growing in a similar fashion to how it did in 2017: low growth coupled with comparatively low inflation data.

2018 Global Credit Outlook

We see the key investment themes to drive performance in Global Credit in 2018 to be similar to last year. We have developed our investment themes: Long US High Yield, Long Chinese Tier1 SOEs, Long European Hybrids, Long European Financials, Long Rising Stars.

Will Plan Sponsors Be Ready for China A Shares?

China has not yet been fully incorporated into indices, creating a mismatch and a unique challenge to investors in navigating this new world order.

Despite geopolitical risks and central banks that will be less dovish than the market expects, the Global Investment Committee forecasts that the G-3 economies will grow faster than consensus and that global equity markets will remain very bullish in the intermediate term.

What lies ahead in 2018 – Thoughts of a Kiwi bond manager

Low global inflation and, until recently, a strong Kiwi dollar have kept New Zealand’s inflation rate low over many years, however things may be about to change.

South Africa at a Crossroads

The imminent party election will be crucial in determining this major Emerging Market’s future.

Shale to the Chief: Can US Shale Oil Keep Up the Growth?

Having recently returned from the US, Stefan Hansen, Senior Research Analyst at Nikko AM Australia, shares his thoughts on US shale oil production and the potential impact on the oil price.

Japan’s “Show Me the Money” Corporate Governance

The implications of a surprising decline in non-manufacturers’ profit margin.

Canada and Australia are not the same

From an economic perspective Canada and Australia share some common features, but we would caution that the performance of the two economies is substantially different than generalisations would suggest.

Uncertainty in Germany – What are the options?

Even as the situation in Germany to form a new government is difficult, financial markets have reacted very mildly to the uncertainties.

May's Position in Question?

We think it is unlikely that May will be replaced within her own party. This is because there is a lack of an heir-apparent, and the Conservative Party would be extremely reluctant to even slightly increase the risk of another election.

Forbes: Powell & Some Fed Board Nightmare Scenarios

“Hopefully for the markets, the Fed transition will be smooth, but it might not be and hawkish Presidents may have much greater influence.”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

New Zealand's New Centre-Left Government Makes for Uncertain Times

Just as politics in other developed countries have recently taken on a more populist and/or anti-capitalist tone, so too has New Zealand’s.

Abe’s New Bull Market in Equities and Home Values

The Case for Abenomics and global reflation leading to a TOPIX level of 2500 in two years’ time.

A Pickup in the Chinese Economy – What to watch

To help bridge the gap between the perceived unreliability of Chinese statistics and the importance of analysing the world’s second largest economy, we look for measures which have less potential to be manipulated.

Will Investors Be Ready When Chinese Bonds Go Global?

Most bond index providers have started to recognize China’s financial market liberalisation and reform efforts. We think it is only a question of time before they are included in the main benchmark indices.

Asia High Grade Credit – A better European approach to Emerging Market Debt

A separate allocation to Asia IG offers European investors a way to mitigate risk within their EMD exposure.

The Rise of Chinese FDI into ASEAN

Our senior fixed income portfolio manager in Singapore explains why he is bullish on ASEAN currencies for the long-term.

House View: Global Economic and Equity Reflation Despite Less Dovish Central Banks

Despite geopolitical risks and less dovish central banks, the Global Investment Committee remains moderately optimistic about the global economy and equity markets, while being cautious on global bonds.

Germany's Election Results – What now?

Despite the uncertainty surrounding the time it will take before the formation of a new government, we do not think there is risk of major policy change in Germany. The election outcome, however, will likely weigh on the aspirations of France’s Macron for deeper Eurozone integration.

Developed Asia-Pacific: Growth Dynamics in Asia-Pacific – Crucial Differences in the Region

Given the shifting dynamics in the region, for investors interested in Asian equities, there are multiple options depending upon the level of risk they are willing to assume. This paper looks at the outlook for several countries in Asia-Pacific.

The Dangers of Averaging

When there are structural changes, simple data averaging often leads to wrong conclusions.

Japan Equity Outlook: “Investing in Japan vs. investing in Japanese companies”

Investing in Japan is not the same as investing in Japanese companies. Given the increase in their overseas exposure, we believe it is a good time to revisit opportunities in Japanese companies.

Forbes: New Info Shows Coordinated Monetary Policy Tightening Ahead

“There was an upward surprise in the US CPI data today, with the CPI exceeding the month-on-month (MoM) consensus estimate”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

“Although Mester and Yellen do not align closely with Trump’s values, they are at least professional central bankers and can likely be relied upon to drive a non-political, non-confrontational but most importantly a safe course for monetary policy and bank regulation.”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Japan’s “Show Me the Money” Corporate Governance

The release of the second quarter data on aggregate Japanese corporate profits confirms my twelve-year theme about improving corporate governance in Japan and how investors should not worry about the slow domestic economy.

Germany's Election Should Be Supportive

Our London-based Global Credit Portfolio Manager lays out the scenarios of the upcoming German election and its ramifications for select German credits.

Reforming India

Our equity portfolio manager who specializes in India concludes that reforms should have a very positive effect on that country’s growth.

Forbes: Why Global Equity Markets Are Ignoring Political Disorder

“Global investors and corporations should adhere to the model that political spats are no reason to get overly frightened or paralyzed.”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

China: the great disruptor of our time

As China’s economic development enters a more sophisticated and mature phase, it is beginning to challenge many of the status quos that have been taken for granted since the middle of the 20th century.

Australian housing – Still waiting for the decline

We identify the fundamentals that have supported Australian housing and the signals that investors should look for to determine if this period of positive appreciation is coming to an end.

Creating Shared Value

This whitepaper explores the evolution of ESG, how Nikko Asset Management conducts it, and the impact that ESG has had on the investment industry.

Japan Equity Outlook: “Work style reform”

We think Japanese companies are poised for a pickup in capital expenditure, led by productivity enhancing investments.

Forbes: The Fed's Tabooed Tool

“Wall Street seems to have long had a hands-off warning to the Fed, which seems to have been very effective, but does this really deserve to be continued? Can Wall Street effectively regulate against speculative bubbles?”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Emerging Divergence as Unwinding of QE Gathers Pace

What is the prognosis for Emerging Markets as major global central banks begin to tighten policy?

Forbes: Taming The US And Chinese Goldilocks Twins

“When the two largest economies in the world are signaling that that they don’t want asset prices to rise too much, investors should take note to curtail any excessive optimism...”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Equities and Income in an Ageing World — Why Dividends Matter

The ageing world presents significant savings and productivity challenges to this and subsequent generations of investors and workers. Change will no doubt remain a constant, as it has been throughout the last two centuries in particular.

China’s deleveraging – When and how will it end?

China’s dual goals of deleveraging and maintaining strong growth may not necessarily conflict, but they certainly pose a delicate balancing act for the government.

Asia High Grade Credit - A More Selective Approach

The rapid development of the Asia Credit markets provides new opportunities to improve the risk and return profile for investors.

Forbes: Bank Bailouts And Italian GDP Changed Draghi's View?

“ECB rhetoric might waver back and forth, but unless there is a global downturn or a major political revolution in Italy, its monetary policy will become less accommodative...”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Improving Japanese Shareholder Returns Ahead

Our top Japanese Equity staff, including our CIO, report on how Corporate Governance remains on a strong upward trend, which should boost alpha for active managers and beta for the overall market via improvements in ROE and shareholder distributions.

The Global Investment Committee remains moderately optimistic about the global economy and equity markets, while being cautious on global bonds.

ESG and Credit Investing — What does the future hold?

Changing perception of ESG’s performance impact: An active ESG approach is now regarded as a catalyst for outperformance.

June Gamble Doesn't Pay Off for May

Theresa May’s Conservative Party lost its outright majority in last Thursday’s general election. What are the implications for Brexit and the markets?

Forbes: After Yellen, An All-White Male Fed Board Ahead?

“Could it be possible that Trump would accept an all-white male Fed Board?”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Ethical Investing – Whose ethics are we talking about?

Of course there’s nothing new about ‘ethical’ investing. What’s changed is heightened public awareness of where our private and public savings are being invested, and increasing recognition that a focus on simply maximising short-term profit is not necessarily the best, or most sustainable approach, over the long term.

Forbes: Japan's “Show Me The Money” Corporate Governance

“Last night’s release of the first quarter data on aggregate Japanese corporate profits confirms my twelve-year theme about improving corporate governance there and how investors should not worry about the slow domestic economy.”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Forbes: The Future Of Navarro And America First Policies

“Many people are claiming that President Trump’s aggressive trade rhetoric during the campaign has been permanently overridden by the realities of the presidency.”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

How would a Korean crisis impact Japan?

While highly unlikely, we examine the potential impact on Japan of a major crisis on the Korean Peninsula.

Forbes: What Was Japan's Bubble Like In 1989?

“Japan's example should always provide a guide to investors to be wary of arguments that surges in risk assets to high valuations based upon huge monetary and fiscal policy stimuli, coupled with excessive confidence, even if long-lasting, are acceptable.”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Japan in Motion: What does the future hold?

We believe that Abenomics is working, however we feel that its success cannot be determined by viewing government policy frameworks in isolation.

Green Bonds – The Next Global Disrupter?

Steve Williams, the Portfolio Manager responsible for Green Bonds in Nikko AM’s London office, examines how this burgeoning asset class is likely to develop into a mainstream part of global fixed income portfolios.

Forbes: Why The Yen Should Not Strengthen In A Crisis

“Any major crisis in the Northeast Asian region, especially one involving a crisis within Japan’s borders, is likely to be handled very aggressively by the Bank of Japan (BOJ), with it bending the rule-book as much as the Fed did during the Global Financial Crisis or as the ECB has done in the past five years.”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

View on the French Elections

Our team of our Portfolio Managers in London, one of whom hails from France, reviews the prospects and ramifications of this weekend's French election.

“We all have heard of the term 'interest rate repression' for how central banks have kept rates at ultra-low levels, but this has only been successfully maintained due to what I call 'inflation repression.'”

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

Japan’s Inflation and Monetary Policy Outlook

Our Tokyo Fixed Income team explains its view on the Japanese labor market and its effect on consumer inflation and Bank of Japan policy.

Value Investing now back in favour — Will this continue?

During the 2016 December quarter, we witnessed the value style stage a partial recovery after having underperformed for at least two years or so. Is this as good as it gets? Or will value continue to outperform after its initial recovery, after having being in the wilderness for some time?

China started 2017 with real momentum, following the property driven debt-fuelled stimulus of last year, and the blue skies a result of Government directives to curb pollution during March’s Central Government meetings. However, with an expectation of lower steel intensity sectors driving growth this year, what will this mean for Australia’s resource sector?

Five Charts to Watch

As commodity prices have risen, the Australian economy is set to benefit from these continuing gains.

Mispricing of Volatility in a Post QE World

Is Volatility too low and what re-pricing could mean for various asset markets

House View: Continued Economic and Equity Reflation

The Global Investment Committee remains optimistic about global economy and equity markets despite their recent strong equity rallies and increased political risks.

Move over OPEC, there is a new commodity cartel in town... China

China has had a significant impact on the supply side in two key global commodities during 2016. Going forward, look out for further actions from China on the supply side of commodities.

A Conversation on E.S.G. with a CIO

Yu-Ming Wang, Global Head of Investment and Chief Investment Officer, International on why a fundamental manager should care about E.S.G.

Japan’s “Show Me the Money” Corporate Governance: 4Q update

Given the release of the fourth quarter data, we update our decade-long theme about improving corporate governance in Japan.

The Real Trade War

There has been much concern lately about the new US administration’s trade policy. Taking a step back and looking at global trade numbers, we can draw a number of conclusions that might explain America’s new thinking on trade.

Asia Credit - A New Major Global Asset Class

Asia’s Credit market has come a long way since the Asian Financial Crisis of 1998, having evolved into a large, deep and liquid market.

Global Oil: The Recovery Continues

Our Senior Portfolio Manager in New York, who specializes in natural resource equity funds, explains the outlook for oil prices.

What does Trump's First Week say about the Unorthodox Future Ahead?

Our head of Global Strategy in New York analyzes and forecasts the developments of major topics arising from the new Administration.

A Dynamic Approach to Managing Credit Risk

Global economic, credit and interest rate cycles are becoming desynchronised. In this paper, we introduce Nikko AM’s first generation default probability model for corporates.

Turkey on a Knife's Edge

Our London-based expert on Turkey updates his views on the precarious situation there.

Asia Credit - A Separate Allocation

Why Asia Credit should stand alone from Global Emerging Market Debt.