Evolving Markets

Investment Insights by our experts and thought leaders

Asian Equity Monthly Outlook - December 2018

The MSCI AC Asia ex Japan (AxJ) Index gained 5.3% in USD terms in November, despite persistent concerns over global growth and a slide in technology stocks.

From the Australian Equities Desk - November 18

The S&P/ASX 200 Accumulation Index returned -2.2% during November.

From the Australian Fixed Income Desk - November 18

The Australian bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) was up 0.24% over the month, outperforming Australian equities which fell over 2%.

Australian Housing - Don't Panic

Over the past year Australian house prices have seen 12 consecutive months of decline, the longest streak of persistent falls in over 20 years.

Stop making sense: the state of volatility in markets

Volatility is back in a big way in 2018. A large increase in the VIX is showing an annual level not witnessed since 2007. The sell-off that started in October appears to have been triggered by a number of negative technical forces in the USA coming into effect at the same time, which impacted global markets.

In the AI Age, Active Managers Making Smart Human Decisions Will Win

One of the pleasures of getting older is that you start to have proper grown-up conversations with your children.

US Recession Risk and the Path for Interest Rates

The US economy is enjoying its second-longest growth cycle in history and is on the way to becoming the longest on record.

Asian Equity Monthly Outlook - November 2018

The MSCI AC Asia ex Japan (AxJ) Index fell by 10.85% in USD terms, on the back of concerns about rising interest rates, slower economic growth, and persistent US-China trade tensions. Large technology stocks were particularly hard hit.

Asian Fixed Income Monthly Outlook - November 2018

US Treasury (UST) yields spiked at the start of October as the market responded to stronger US data and Federal Reserve (Fed) Chairman Jerome Powell's hawkish comments.

Global equities corrected downwards by 7.5% in USD terms in October. Stocks in the US ended the month down 6.5% after an intra-month peak-to-trough drawdown exceeding -10%.

Asia's Current Account: Good or Bad?

On the back of unrelenting USD strength, 2018 has been a tumultuous period for Asian currencies. Countries in the region with current account deficits have been facing more currency pressure, prompting their central banks to engage in series of rate hikes to defend their currencies.

Trump Will Hate These Buybacks

Clearly, the U.S. Administration has tried to protect the steel and other industries considered important for defense and economic security. The intent is to have them invest in new capacity due to the recently higher product prices.

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

From the Australian Equities Desk - October 18

The S&P/ASX 200 Accumulation Index returned -6.1% during the month.

From the Australian Fixed Income Desk - October 18

The Australian bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) was up 0.48% over the month, outperforming Australian equities which tumbled over 6%.

Climate Change - an Unstoppable Force?

As the world experiences more extreme weather patterns and climate-related incidents, pressure is mounting to curb greenhouse gas emissions.

The trade war between the US and China appears to be morphing into deeper and more protracted conflict as reflected in a recent speech by US Vice President Mike Pence, who criticised China not just for trade practices but more fundamentally for its broad political and economic model.

Asian Equity Monthly Outlook - October 2018

The MSCI AC Asia ex Japan (AxJ) Index fell by 1.38% in USD terms in September. The Sino-US trade conflict and rising oil prices were key drags on performance. During the month, the US Federal Reserve raised rates for the third time this year as widely anticipated, amid positive economic data.

Asian Fixed Income Monthly Outlook - October 2018

In September, the US Federal Reserve (Fed) raised interest rates by 25 basis points (bps). The monetary authority removed the clause that policy rates are "accommodative", and modestly raised its growth forecasts for this year and next.

ESG Insights : Assessing Stranded Assets in the Electricity Sector

Nikko AM values companies based on their sustainable earnings capacity. Embedded in our research process is a consideration of all relevant risks that impact sustainable earnings and therefore have valuation implications. This obviously includes risk factors that fall within the ESG realm.

From the Australian Equities Desk - September 18

The S&P/ASX 200 Accumulation Index returned -1.8% during the month.

From the Australian Fixed Income Desk - September 18

The Australian bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) was down 0.42% over the month.

Food Tech: Investing in the Sustainability of the Future

The late celebrity chef Anthony Bourdain once remarked that “Singapore is possibly the most food-centric place on Earth, with the most enthusiastic diners, the most varied and abundant, affordable dishes — available for cheap — on a per-square-mile basis.”

Finding Multi-Baggers From ESG Controversy

The NikkoAM Asia ex Japan equities team focuses on two core characteristics in our fundamental research; sustainability of returns and positive fundamental change.

As markets continue to grapple with the potential for a protracted trade war between China and the US, central banks have stuck to their task of setting monetary policy.

Another Conversation on ESG with a CIO

In my first article, I outlined our philosophy that ESG is fundamental to, and inseparable from, good investing. ESG is fully integrated into our investment process, because it is the right thing to do. We believe that one cannot claim to be a good fiduciary, mandated to create and preserve long-term wealth, while ignoring the principles of sustainable and responsible investing.

Asian Equity Monthly Outlook - September 2018

The MSCI AC Asia ex Japan (AxJ) Index fell by 1.02% in USD terms in August, largely on the back of currency weakness. Investor sentiments were driven by fears of an escalating trade war and risks of an emerging market contagion. During the month, the US Federal Reserve (Fed) left interest rates unchanged.

Asian Fixed Income Monthly Outlook - September 2018

In August, the US Treasury (UST) curve flattened. Near-term yields rose due to expectations of a September Federal Reserve (Fed) rate hike, while mid to long-dated yields fell. Escalating US-China trade tensions and the weaker-than-expected July US jobs report pushed UST yields lower at the start of the month.

Solid global economy and equity returns

Our updated house view is that the G-3 and Chinese economies will continue solid through September 2019 approximately in line with consensus expectations, while we expect central banks to reduce their accommodation similarly to consensus expectations.

ESG in the investment process

Wealthy individuals across generations are interested in investing for environmental or social impact, but Millennials are by far the most active in evaluating and indeed, demanding these strategies.

Promoting Client Interests

The Corporate Sustainability Department that Nikko Asset Management recently established embodies the Firm’s enduring commitment to integrating environmental, social, and governance (ESG) principles in every aspect of its operations.

From the Australian Fixed Income Desks - August 18

The Australian bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) was up 0.81% over the month. The yield curve flattened as the spread between long-term and short-term bond yields narrowed.

From the Australian Equities desk - August 18

The S&P/ASX 200 Accumulation Index rose 1.4% during the month.

A Numbers Game: The Changing Face of Demographics

In 2011 a dramatic shift occurred throughout the developed world — working age populations began a multi-decade decline. Demographic shifts like this in an economy can have profound effects, including changes in growth and debt metrics.

August 2018 Australian Reporting Season: The Good, The Bad, and The Oddly

Confession season was eerily quiet leading into reporting season, unlike the noise from the Royal Commission and the incredible events out of Canberra, where another Prime Minister didn’t reach their full term.

The Nikko AM Australia Approach to Value Investing

Nikko AM Australia values companies based on their sustainable earnings capacity. That is, we determine the intrinsic value by capitalising the sustainable or mid-cycle earnings of every stock under coverage.

Trump Is Going To Hate This Trade Data

It was just reported that China’s exports to the U.S. accelerated 8% year-over-year in July while U.S. exports to China decelerated to 3% year-over-year.

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

China Continues to Mitigate its Macro Concerns

The macroeconomic issues that plague China are well known, but we believe that China is able to engineer a soft landing and to sustain growth, albeit at a lower level than it is used to.

Japan's 'Show Me The Money' Corporate Governance: Renewed Surge

After improving in the spring, the US trade imbalance is worsening again, especially vis a vis the Eurozone and China, with significant repercussions for international monetary and economic relations.

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

Global Credit Strategy: Midyear Review

We entered the year optimistic, and with the knowledge of the last six months, we are pleased that most of our expectations worked out.

Value vs. Growth and the Divergence to the Extreme

All major value equity indices show that the last five years, and in particular the last 12 months, have been a challenge for value as a style.

Too Much Pessimism About China-US Talks

Nearly every expert seems to be pessimistic about any progress being made during the US-China talks this week, citing the “low level delegations” attending, but there are many signs from both sides of an incipient deal, not to mention the obvious economic and political incentives to achieve such.

For Jackson Hole: Using MBS, The Fed Can Slow The Economy With Fewer Rate Hikes

The Fed, led by Chairman Powell, will very likely resist any effort by the White House to pressure it into halting rate hikes.

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

Recent moves by the Chinese government to further liberalize its fund management industry have generated a lot of interest with some observers projecting that China will overtake the UK to be the second-largest asset management market.

Uncovering Value in Japanese Equities

Global equity markets rallied throughout 2017 without any major setbacks. With volatility at extreme lows, it could be said that 2017 was an unusually fortunate year for market participants in terms of risk and reward.

Erdogan Takes It All

In the past few years, Turkey has faced some of the most monumental challenges in its recent history.

Financial markets continue to come to terms with a more protectionist and less globalised world. The surprise perhaps is not that tariffs have finally been imposed by the US on its trading partners, but that it took so long for a key campaign promise to become reality in spite of Republican control of the House, the Senate and the White House since November 2016.

Will Bloomberg's Index Become the First to Include Chinese Bonds?

In March 2018, Bloomberg announced a conditional decision to include Chinese bonds in its flagship bond index: Bloomberg Barclays Global Aggregate, starting from April 2019.

Forbes: U.S. Trade Deals Could Likely Happen Soon

It may seem an optimistic view, but conditions seem to be shaping up for some major trade compromises relatively soon.

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

It seems that China does not wish to compromise with the U.S., but neither does it wish to retaliate strongly to the $200BB of additional tariffs. Since it does not wish to “lose face” in giving this light response, it is putting a positive spin on its actions by saying it wishes to be the leader of the free trade movement.

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 portfolio manager provides an update for Latin American markets in the midst of a hectic election schedule. Despite the risks, pro-market reforms should still progress to varying degrees across the region.