As widely expected, the US Federal Reserve (Fed) raised interest rates by 25bps in December, its third rate hike this year. It also raised its GDP forecast for 2018.
The MSCI AC ex Japan (AxJ) Index returned 2.7% in USD terms in December, outperforming the MSCI AC World index which returned 1.4%.
Our Senior Portfolio Manager for Emerging Markets in London forecasts that in 2018, this asset class could well match 2017’s achievement.
We expect the economic backdrop for Asian credits to remain constructive in 2018, but remain cognizant of several risks including rising interest rates, robust supply, unexpected weakness in China, geopolitical developments and cross-asset volatility.
The global recovery is expected to continue, albeit at a more moderate pace. Meanwhile, we foresee policy normalisation and an acceleration of inflation in Asia.
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.
The MSCI AC Asia ex Japan (AxJ) Index returned 38.0% in USD terms year-to-date, on the back of a broad-based economic recovery. The Index outperformed the MSCI World Index, which rose 20.8% in USD terms in the same period.
US Treasury (UST) yields declined during the month. The nomination of Jerome Powell as the next US Federal Reserve (Fed) chairman overshadowed stronger US economic data, but was subsequently offset by increased geopolitical risks in the Middle East and a setback to US tax reform.
The MSCI AC Asia ex Japan (AxJ) Index returned 0.6% in USD terms in November. The index approached ten-year highs during the month on expectations of continuity in US Federal Reserve policy and robust economic data, but gains were pared at month-end by a sell-off in technology heavyweights.
The imminent party election will be crucial in determining this major Emerging Market’s future.
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.
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.
In 2018, our key focus is to produce and maintain alpha in stock selection. Looking back, the year of 2017 has indeed been a year of strong expansion in terms of equity performance and this has brought much cheer to investors.
Even as the situation in Germany to form a new government is difficult, financial markets have reacted very mildly to the uncertainties.
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.
The MSCI AC Asia ex Japan (AxJ) Index returned 4.7% in USD terms in October, outperforming the MSCI World Index which returned 1.9%.
US Treasuries (USTs) fell in October, as prospects of higher growth and inflation increased after the US Senate approved the Republican-backed budget for 2018.
“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
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.
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.