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.
Our Chief Global Strategist explains the reasons why there is too much unjustified pessimism about Abenomics.
Our Asian currency expert discusses the potential ramifications of the increasing CNY-orientation for Asian currencies.
What is more important for credit spreads in the current environment: the fundamentals or central bank actions? Our research suggests that since 2010 the answer has been central banks and, in particular, the US Federal Reserve.
The global advertising industry is undergoing a rapid transition. Advertisers are currently under-allocating to mobile advertising, and there are some companies that are well placed to take advantage of this trend.
Asia ex Japan equities rebounded in March, with the MSCI Asia ex Japan index returning 11.2% in USD terms. Sentiment was driven by a combination of dovish rhetoric from the US Federal Reserve (Fed) and easing by the European Central Bank (ECB).
For the next 12 months, we are quite positive on performance prospect for global credit, singling out five investment themes.
Since 2011, Brazilian assets have re-priced to the downside. Given the size of the adjustment – both in commodities and assets – the question is whether Brazil is now presenting attractive investment opportunities.
Nikko Asset Management's Global Investment Committee met on March 29th and updated our intermediate-term house view on the global economic backdrop, central bank policies, financial markets and investment strategy advice.
We expect June and December Fed hikes, but only mild further easing ahead for the BOJ and ECB. Meanwhile, we expect oil prices to creep higher through 2016 despite the stronger USD due to relatively firm economic developments in China and the G-3.
We expect that global equity and bond investing will be positive for Yen based investors due to Yen weakness, but for USD based investors, we are taking only a neutral stance on global equities due to a cautious forecast for US equities, whereas we are positive on Asia-Pac ex Japan, Japan and Europe. Meanwhile, we are moderately negative on bonds in each region when measured in USD terms, so we underweight them.