Insights

Investment Insights by our experts and thought leaders

Japan's “Show Me the Money” Corporate Governance - June 2015

We expect that profit margins will expand further in coming quarters, driven by a large corporate tax cut and continued industry rationalizations that further prove that Japan's structural profitability trend continues upward.

Does the price action of bunds signal an end to ultra low rates?

We do not expect the recent steepening of the bund yield curve to be the beginning of a sustained new trend. Moreover, Eurozone and German economic data, albeit improving, are not sufficient to support the higher bund yields on a sustained basis.

Did Asia's Central Banks Engage in the Global Currency War?

Since the Fed starting hinting at the normalization of interest rates a year ago, Asian central banks' foreign reserve accumulations - except for India and Hong Kong - have either incurred substantial losses or remained flat.

Recent yield rises don’t necessarily signal the end of bond market rally

With many markets having rallied from major support levels when they were in highly oversold positions, we believe that bond markets should stabilise or rally from current levels.

Asian Fixed Income Monthly Outlook - May 2015

Yields of the US Treasuries (USTs) traded in a relatively tight range, eventually ending higher at month-end. At 2.03%, the 10-year point on the UST curve was up 11 basis points (bps) compared to the level at end-March.

Asian Equity Monthly Outlook - May 2015

The MSCI AC Asia ex-Japan returned 7.2% in April after shrugging off initial weakness and outperformed the MSCI AC World by 2.3% in April in USD terms.

The Japanese stock market has continued to rise, punctuated by the Nikkei 225 recently closing above 20,000 points for the first time in 15 years.

Japanese Overseas Equity Exposure Rising

We expect that Japanese pension funds will continue to shift their investments into risky assets in 2015.

Low oil prices: Saudi Arabia can afford to bide its time

Oil-producing countries have seen the largest drop in their foreign exchange (FX) holdings over the last year. In our view, Saudi Arabia can afford to handle oil prices at their current level for some time but ...

China's LGFV debt swap – Shining light on the Shadows

The importance of President Xi Jinping's strong leadership cannot be stressed enough. Under him China is undergoing dramatic changes. While the most thorough cleansing of state corruption is ongoing, elements of China's grand strategy are becoming more evident both domestically and on the global stage.

Asian Fixed Income Monthly Outlook - April 2015

Prices of the US Treasuries (USTs) ended March higher, with 2-year and 10-year USTs yields closing the month 6 basis points (bps) and 7bps lower respectively.

Asian Equity Monthly Outlook - April 2015

The MSCI Asia-Pacific ex-Japan returned -0.3% in March after shrugging off initial weakness and outperformed the MSCI AC World by 1.3% in March in USD terms.

Market isn't overheating even after Nikkei touched 20,000

The market isn't overheating even though the Nikkei stock average touched the 20,000 level, nor do we believe that overseas markets are overheating right now.

With the dollar/yen hovering around JPY120 to the U.S. dollar, Japanese stocks have recently been showing extraordinary strength, marked by the Nikkei 225 breaching the JPY20,000 level on April 10 for the first time in roughly 15 years – a level that it retook on 22 April and has stayed close to ever since.

Recent Defaults by Chinese Issuers

Defaults from Chinese companies have been on the headlines recently. First, the default of property developer Kaisa Group last Monday (20 April 2015) was expected given the challenges in the ongoing debt restructuring.

The New Governance Code – What impact will it have on Japanese companies?

Due to the developments described in this article, there is ample room for growth at Japanese firms and much opportunity for investment success.

Our View on the Crucial Chinese Property Market

Given the significant proportion of real estate investment as a percentage of GDP, as well as the proportion of local government revenue generated from land sales, the property market remains a crucial driver of the Chinese economy.

March Tankan Report Commentary

The March “tankan” survey results are not expected to lead to the BOJ's further acceleration of QE.

US Federal Reserve faces headwinds as it starts to raise rates

Interest rate and foreign exchange volatility has begun to increase as the market anticipates the time when the US Federal Reserve will start to reduce monetary accommodation and raise interest rates.

G-3 Economies Should Rebound Nicely

In sum, there certainly are some worrisome issues, as always, but we find none of them convincing enough to prevent moderate increases in equity prices.

China's Outlook and now Positive on Emerging Markets

Much as we expected, China's economy has continued to slow faster than consensus, but does not appear to be in a hard landing.

Central Bank, Inflation, Currency, Commodity and Bond Forecasts

Central Banks: Despite firm economic growth, we believe that a negative YoY CPI through September will steady the Fed's hand.

Regional Equity and Asset Class Forecasts

Coupled with our expectation for global bond yields to rise moderately, we maintain our overweight view on global equities vs. bonds.

Japanese Equity: Improved Export Data May Indicate Turning Point for Japan

The recovery in profits by Japanese export firms should continue to attract the attention of the markets in the first half of 2015.

Asian Fixed Income Monthly Outlook - March 2015

Prices of the US Treasuries (USTs) weakened in February, with yields of the 10-year USTs higher by about 35 basis points (bps).

Asian Equity Monthly Outlook - March 2015

The MSCI Asia Pacific ex-Japan gained 3.71% but underperformed the MSCI World which gained 6.43% in SGD terms. The MSCI World’s strong performance was attributable to the supportive external backdrop with improving economic indicators out of Europe.

Japan's Successful “Show Me the Money” Corporate Governance

John Vail updates his long-standing theme: Japan's Successful “Show Me the Money” Corporate Governance.

European Property: Does it Signal Global Deflation?

Through 2014, one of the largest asset classes in the world was virtually unnoticed as an indicator that Europe is not pushing the global economy into widespread deflation.

Will European QE deliver on Earnings expectations?

There are several credible reasons to expect that QE will boost corporate earnings in Europe, though by not as much as in the US. However the risk of disappointment relative to inflated expectations remains high.

Will deflation or inflation be the global focus for 2015?

In 2015, markets will be looking for any pick up in European and Japanese inflation as a result of their QE programmes. With growth picking up, we may start to see signs of a rise in US inflation.

Economic Disappointment in Japan? Key points to remember (again)

The disappointing economic data should not worry investors in Japanese risk assets very much at all.

Australia: Japanese and European QE likely to subdue bond yields and increase currency market tensions in 2015

The key theme of the past few years has been quantitative easing. Although the US has come to the end of its version of this experiment, QE programmes have begun or are about to begin in Japan and Europe.

Asian Fixed Income Monthly Outlook - February 2015

US Treasuries (USTs) rallied in January, with the 10-year UST yield ending the month at 1.64% which was 53 basis points (bps) lower than end-December.

Asian Equity Monthly Outlook - February 2015

Asia Pacific ex-Japan markets outperformed its global peers, registering a return of 3.8% in SGD terms as compared to the MSCI World index which gained only 0.4% in SGD terms, primarily due to the stronger Greater China region and Indian markets which were the best performing markets in January.

According to the 2014 Labour Survey recently released by Japan’s Ministry of Health, Labour and Welfare, total cash earnings – i.e., the total of contractual cash earnings (such as fixed monthly salaries) and other special cash earnings (such as bonuses) – of Japanese workers rose 0.8% in 2014, the first such rise in four years.

What will happen to US Treasuries if Japanese government bond yields go to zero?

In a pre-GFC and pre-QE world, zero or negative interest rates on a German, Japanese or US 10-year bond would have been considered highly implausible. However...

Preparing for the Next Phase of Global Evolution: More People and Bigger Cities

We expect the next phase of the global evolution to be driven by a growing global population, rapid urbanisation and for most of it to happen in emerging markets with increasing focus on "green" development.

Implications of the ECB's quantitative easing program for interest rates and currencies

ECB's QE: The major question is, will this program work given the European model of debt creation is via the banking system and not the bond markets?

Steel and Iron Ore Deflation to Continue

The steel industry and its underlying iron ore industry are witnessing excess production and deflationary forces that are similar to the global energy markets.

ECB Success but with Caveats

The QE announcement was a major step forward for Eurozone. It is not without dangers and questions about implementation, however, so markets should not get over-enthusiastic about it.

BOJ Indicates a Move Towards "True Core CPI" More Globally

Now that oil prices have declined, if a central bank targets its overall CPI at 2.0% for 2015, it would likely be labeled as being overly aggressive and perhaps attempting to unfairly weaken its currency.

Will China Provide Global Liquidity Soon?

As the Fed continues to unwind its stimulus, even amidst threats of global deflation, there are hopes that China will accelerate the liberalization of its capital account and take over the Fed's role as the global supplier of liquidity.

Asian Fixed Income Monthly Outlook - January 2015

US Treasuries (UST) had a volatile trading month in December and ended the periodwith the 5- and 10-year UST yields 17 basis points (bps) and 0.7bps higher compared to November.

Asian Equity Monthly Outlook - January 2015

Asia Pacific ex-Japan markets did better than other emerging markets, posting a negative return of 2.1% in USD terms as compared to the latter which returned -4.6% in USD terms as it was dragged down by Russia.

Reasons for an Oil Price Rebound

We expect oil prices to rebound and for the time being, we will stick with our call for Brent to rebound to $72 by end-June 2015, although $65 is a more plausible goal.

Asian Credit Outlook 2015

Asia credit recovered strongly in 2014. Long duration bonds gained as the intermediates and long-end US Treasury (UST) yields fell in response to disappointing growth outcomes elsewhere in the world even as the shortend of the curve began adjusting to rate hike expectation in the US.

Multi-Asset Investment Themes 2015

It is that time of year again when those in the investment business (unfairly referred to as the ‘chattering class’) share their prognostications on the path of asset classes for 2015.

Market Commentary – Reasons for Oil Prices Rebound

Clearly, oil prices have fallen further than nearly everyone anticipated. When our Global Investment Committee met in December, Brent was trading at $66.

Market Commentary – Offshore RMB (CNH) Market Outlook 2015

The overall CNH bond market gained 3.02% in local terms in 2014. Both sovereigns and credits delivered positive returns of 2.6% and 3.14%, respectively.

Through the careful examination of historical data, it is possible to empirically affirm the existence of several anomalies in the stock market, even though there is not always a clear theory or explanation as to why they exist.