Volatility across global markets has picked up in recent months following an abnormally long period of stability and strong returns across asset classes.
The Japanese equity market fell in March, with both the TOPIX (w/dividends) and the Nikkei 225 (w/dividends) dropping 2.04% on-month.
Despite recent volatility, we see the rally in Asian equity markets being well supported by both positive structural reform and increasing economic activity across the region.
Japanese stocks were not spared the global selloff in early February. While we would not be surprised to see volatility persist as market conditions normalise, we continue to expect healthy returns for risk assets such as equities.
The Bank of Japan (BOJ) has been trimming its bond purchases lately, fuelling speculation that the central bank may wind back its monetary stimulus this year.
The MSCI AC Asia ex Japan Index returned 7.6% in USD terms in January, amid optimism about solid economic growth and corporate earnings. China's solid stock market gain was underpinned by the financials, energy and real estate sectors.
Going forward, a robust global economy and well telegraphed withdrawal of monetary stimulus in advanced economies provides a good back-drop for export-oriented Asian economies.
The MSCI AC Asia ex Japan (AxJ) Index returned 0.6% in USD terms in November.
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. The STI (Dividend Reinvested) Index has returned more than 20% year-to-date, a performance not seen since 2012 and that ranks amongst the top five best annualised returns in the past 20 years. This naturally leaves us with the question: what does the year ahead hold following such strong gains?
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%.
The Japanese equity market rose in October, with the TOPIX (w/dividends) climbing 5.45% and the Nikkei 225 (w/dividends) rising 8.16%.
The Japanese equity market moved upwards in September, with the TOPIX (w/dividends) climbing 4.34% on-month and the Nikkei 225 (w/dividends) rising 4.28%.
The MSCI AC Asia ex Japan (AxJ) Index fell by 0.1% in US dollar (USD) terms, underperforming the MSCI AC World Index which returned 2.2%. Profit-taking and currency weakness relative to the USD pressured returns in September.