The Trump reflation trade may have lost some of its shine during the quarter, but any disappointment was more than overshadowed by strong global data as exports and production continued to gather pace.
Is Volatility too low and what re-pricing could mean for various asset markets
The Global Investment Committee remains optimistic about global economy and equity markets despite their recent strong equity rallies and increased political risks.
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.
MSCI Asia ex Japan (AxJ) was up 3.4% in USD terms, marginally outperforming MSCI AC World. Absolute returns were positive for all AxJ markets except the Philippines.
US Treasury (UST) yields traded in a tight range in February. Risk assets rallied and UST yields rose in the first half of the month, on the back of the prospect of tax cuts and a Dodd-Frank overhaul in the US.
Given the release of the fourth quarter data, we update our decade-long theme about improving corporate governance in Japan.
In line with our market outlook going into 2017, we previously observed the prospect of attractive opportunities emerging during the year.
With President Trump announcing that he will be releasing his tax plans in the coming weeks, we have shifted to a more cautious position on US duration. The risk is that President Trump announces a sizeable stimulus package, with the backing of the broad Republican base.
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.
Our Senior Portfolio Manager in New York, who specializes in natural resource equity funds, explains the outlook for oil prices.
Asia ex-Japan (AxJ) equities returned 6.2% in US Dollar (USD) terms, outperforming MSCI World. Singapore, Hong Kong and Chinese equities outperformed while Indonesia, Malaysia and Thailand lagged.
US Treasury (UST) yields ended higher in January as weaker-than-expected payroll data led markets to moderate their forecasts for Federal Reserve (Fed) rate hikes in 2017.
Given the challenges, why bother?
Our head of Global Strategy in New York analyzes and forecasts the developments of major topics arising from the new Administration.
Credit markets are expected to have another positive year. We expect economic growth in Asia to be stable but see some potential downside risks.
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.
In-depth report: Economic growth in Asia is expected to remain broadly stable in 2017. While there will be greater external uncertainties as well as country-specific challenges, Asian economies are, on balance, better equipped to deal with external pressures compared to a few years back.
Our Senior Portfolio Manager for Emerging Market Debt in London forecasts that in 2017, this asset class could well match 2016’s achievement.
As rates could rise further in 2017, we expect that a broad range of investment themes will help generate enough alpha performance to offset the rates impact.
2016 was a year of surprises. The Federal Reserve (Fed) backtracked on its outlook on interest rate hikes, Britain voted to leave the European Union, Italian Prime Minister Matteo Renzi resigned after a resounding defeat in the Italian referendum, and Donald Trump triumphed over Hillary Clinton to become the 45th US President.
Asia ex-Japan (AxJ) equities returned -2.0% in US Dollar (USD) terms, underperforming MSCI World and MSCI Emerging Markets (EM). Currencies across AxJ generally weakened against the dollar following the Federal Reserve's (Fed’s) decision to hike rates.
USTs weakened further in December, as caution prevailed following the November sell-off. As widely expected, the US Federal Reserve (Fed) raised interest rates by 25 basis points (bps).
As we start 2017, we expect the continued recovery in Japan’s economy will be driven by three factors outlined in this article.
Trump certainly is non-conventional, in many ways similar to Teddy Roosevelt. Hopefully, Japan can adapt to this new reality, and instead of blocking Trump's initiatives, be able to have acceptable compromise “deals” ready.
Nikko AM's Global Investment Committee's 2017 Outlook — More Economic and Equity Reflation, Despite Less Dovish Central Banks
Previously, capital markets had become highly conditioned to a “lower for longer” world, with the search for yield having implications both within and across risk asset classes.
We believe that in an increasingly uncertain world, Japan’s less uncertain market will provide a compelling opportunity for serious investors.
The phrase “lower for longer” could well become unfashionable very quickly after years of central banks combating the forces of deflation and wishing for inflation instead.
2016 may best be remembered as the year in which Trump won and the world changed. The question becomes which reforms will take centre stage.
The cumulative positioning of investors in companies and asset classes that are deemed safe in a “lower for longer” environment is undergoing a significant test at present.
Our China Fixed Income expert in Singapore expounds upon how the Trump election is forcing China into taking specific economic policies.
Asia ex-Japan equities returned -2.9% in US Dollar (USD) terms, underperforming MSCI World.
UST yields surged in the month as Trump's election victory prompted expectations of a significant fiscal package and possible upside inflation risk under the new administration.
A combination of key regional factors—including demographics, urbanization and existing infrastructure gaps—all point to sustainable growth for healthcare in Asia ex Japan.
Following the US election, we have seen bond rates continuing to increase, a stronger US dollar, firmer commodity prices, and a US stock market at all-time highs. Is optimism around the US President-elect’s fiscal expansion masking the true deflationary picture?
We expect Italian assets to underperform until it becomes clear who will be able to form and lead a new government. Nevertheless the outcome of the referendum was already priced into financial markets.
If the deal is adhered to then it is significant and will see the global oil market fall into under supply through 2017.
Given the release of the third quarter data, we update our decade-long theme about improving corporate governance in Japan.
Following Trump’s election, our Emerging Market team in London, supported by John Vail, our Global Chief Strategist, discuss what, at this early stage, we can potentially expect to see from the US regarding its relationship with Emerging Market economies.
October was another difficult month for Global credit markets, in particular for Investment Grade bonds. By contrast, more risky High Yield bonds outperformed.
Our oil experts in the US and London analyze the Saudi oil conundrum.
Our Senior Portfolio Manager for Asian equities reflects on Asian markets in the wake of Trump’s Triumph.
Neither Brexit nor Trump’s win was an accident – ‘the people’, in particular the working and middle classes, are purposefully and deliberately giving the political elites a thump on the nose.
Asia ex-Japan equities returned -1.5% in US Dollar (USD) terms, outperforming the MSCI World which declined by 1.9%.
USTs ended lower in October. Better US economic data and a hawkish statement from the Federal Open Market Committee (FOMC) bolstered expectations of a December interest rate hike.
Much like the BREXIT result, Americans surprised the consensus with an anti-establishment vote.
Our Senior Portfolio Manager for ASEAN equities reviews the trend towards Strongman rule in ASEAN.
Advances in science and technology are continuously changing and progressing the medical profession and broader healthcare industry. While the industry growth will be strong, not all participants will fare equally.
Our Multi-Asset portfolio manager based in Singapore reviews the prospects for profit margin expansion in the three main Emerging Market regions.
Singapore's weak 3Q2016 GDP report and MAS's 'unchanged' policy guidance on the SGD paint a sombre outlook for the Singapore economy for the rest of 2016 and 2017.
"Find growth and you will find performance" was our Asian Equity investment mantra in early 2016 as the world grappled with slowing growth and lethargy with monetary experimentaton in low and depressed interest rates.
Emerging markets (EM) have endured strong adjustments in commodities and currencies that coupled with reforms makes a good case for better growth ahead.
Asia ex-Japan equities rose in September, returning 1.6% in US Dollar (USD) terms and outperforming both the MSCI World and MSCI Emerging Markets indices.
USTs ended September mixed. While the Federal Reserve left interest rates unchanged and the Bank of Japan reinforced commitment to monetary easing, the ECB's lack of new stimulus disappointed the market.
It has continued to be a wild roller-coaster ride for investors, and unfortunately, it is not likely to be very calm for the foreseeable future. Investors must keep a keen eye on geopolitical risk and be ready to act if such appear to accelerate into a situation that could significantly impact markets.
No turning back — 2% inflation target not only intact but enhanced with a new “inflation overshooting commitment”
Although it is tempting to join the ‘peak demand’ bandwagon, as investors it is important to understand the impact that different technologies (and their timing) have on energy prices.
Our UK expert on BREXIT and our chief global strategist respond to Japan’s concern about its investments in the UK.
QE policies have had a material impact on bond yields and valuations. We believe that the evolution of these policies will be more important than fundamentals in indicating when bonds can break the cycle of ever-declining yields.
Central bank policy from the US, Japan and Europe are strongly affecting the current global fixed income markets. New Zealand and Canadian economies also face continued pressure.
Given how important central bank policies are for the pricing of assets, our focus has to be on what they do next. If debt monetisation were to occur, it would have significant implications for equity investing.
Asia ex-Japan equities extended its upward momentum in August, returning 3.4% in US Dollar (USD) terms and outperforming MSCI World by 3.3%.
USTs ended marginally lower in August as the market adjusted to the possibility of a Fed rate hike, buoyed by sustained resilience in the labour market.
In our view, electric vehicles will have significant implications (both positive and negative) for many sectors, particularly automotive and oil, presenting investors with interesting opportunities, particularly in Asia.
Oil production in Nigeria has been severely hampered in recent months as local militant group, the Niger Delta Avengers, have committed numerous attacks on oil pipelines in the region, materially lowering the country’s oil production. Our Emerging Market (EM) debt team in London take a closer look the political situation in Nigeria, the origins of the conflict, prospects for its potential resolution and its impact on global oil prices.
Many market commentators have been speculating that we are finally coming to the end of the bond rally that has endured for the past 35 years. It's worth noting that this is nothing new—we have heard similar suggestions many times before over recent years.
Given the release of the second quarter data, we update our decade-long theme about improving corporate governance in Japan.
In developed markets, global bonds have benefited from recent flows out of Japan into positive-yielding markets. The New Zealand and Canadian economies face continued pressure and a September US rate rise is now looking more unlikely.
Japan is a consensus-driven culture and improved corporate governance is now the consensus. There are clear signs that many companies are moving towards more shareholder-oriented management.
US Treasury (UST) yields ended July mixed: yields of shorter maturities climbed, whilse those of longer maturities fell.
Asia ex Japan equities rose by 4.8% in USD terms in July, outpacing global equities. Hopes for monetary and fiscal stimulus led to strong buying of Asian equities.
The CEO of our Indian joint venture and our senior EM portfolio manager in London analyze the great importance of recent legislative developments in India.
Our expert on Asian financials describes the exciting technological developments that will change the way we all do business in the future.
Our expert on Turkey details his cautious stance on Turkey's near-term future.
Our Chief Strategist in Japan shares his views on political landscape and the economy.
The major consideration for markets in June was the Brexit vote in the UK. Although we are sceptical about the most pessimistic scenarios for the UK, there will be some negative impact on growth.
US Treasury (UST) yields gained in a volatile mon across asset classes. The US Federal Reserve (Fed) scaled back projections for raising interest rates, while the UK voted to leave the EU by a 4% margin, surprising markets.
Emerging Market reforms won't stop or pause with the current market recovery.
Following our analysis of the recent UK vote, our Emerging Market debt team in London discusses Brexit's potential ramifications for this asset class.
Many are wondering if it's time to give up on Abenomics. While some of the scepticism is understandable, we believe it is too early to throw in the towel.
Two of our senior portfolio managers in London update their earlier pieces on what lies ahead for what should be a long-drawn out BREXIT path.
In light of the significant volatility ensuing from the results of the EU Referendum in the UK, we share our initial thoughts on the evolving situation as well as provide an update on the strategy you are invested or have an interest in and the implications of the event on the broader investment landscape in Japan.
The immediate fallout from the Brexit win has been a strong flight to safety. US Treasuries rallied with the UST 10-year yield down to 1.44%, lower by 31 basis points (bps) on 27 June 2016.
Nikko Asset Management's Global Investment Committee’s post-BREXIT scenario, including market and economic targets, is on the moderately gloomy side.
Uncertainty after Brexit vote, but the correction in valuations and market volatility could provide buying opportunities in some fundamentally strong credits.
Although it is still too early to determine the full implications of Brexit over the longer term, in the short term, we can expect significant market volatility as uncertainty prevails, but this does not mean that investors should panic.
The UK's late June vote in favour of 'Brexit' was initially read as a deep negative, particularly given that markets were priced strongly in favour of a 'Remain' vote. However, after brief reflection, markets outside the region saw a rally, with risk asset performance more than making up for Brexit losses.
Asia ex Japan equities declined by 1.3% in USD terms in May, largely on the back of currency weakness. Markets started the month under pressure, but later recovered on better-than-expected US economic data and recovering oil prices.
US Treasury yields remained largely unchanged in May. The impact of a disappointing US payroll figure was offset by the release of the US Federal Reserve’s April meeting minutes, which revealed that most policymakers favoured a rate hike in June should the US economy continue to improve.
Two of our senior portfolio managers in London update their earlier piece on BREXIT with numerous points of great interest on this crucial topic.
Continued easy monetary policy in Europe and Japan will be supportive for global interest rates, but the case for further limited rate hikes in the US remains in place for 2016.
Our oil experts in London and New York update their bullish views in January with new facts, while retaining their positive intermediate-term view on oil prices.
Our Chief Strategist in Japan explains why Japan’s government debt situation is sustainable.
Our global rates and currencies strategist in Australia lays out his dovish Fed scenario as an alternative to our house view. In it, he expects the Fed to wait until September or later to raise rates, and states his case that the Fed’s actions do not affect US bond yields.
We believe it is time to reassess market attitudes towards liquidity. We may have to start moving towards a model where investment horizons and liquidity expectations are more appropriately matched to the asset classes being invested in.
Our London-based portfolio manager, Simon Down, and his colleagues review the refugee crisis that is turning European politics into a "hornets' nest."
Our two leading Global Emerging Market debt experts, both based in London, weigh the possibilities of a sustained upturn in this long-suffering asset class.
Asia ex Japan (AxJ) equities declined by 0.9% in USD terms in April, largely on the back of currency weakness. Oil markets reached their highest levels since last November, while activity data in China improved.