Investment Insights

 

Navigating Japan Equities: Monthly Insights From Tokyo (December 2024)

This month we evaluate factors expected to attract attention in 2025 from a Japanese economy and equity market perspective. And as the government compiles another stimulus package, we discuss how Japan could be about to test the Laffer curve theory, which argues that tax cuts can actually increase overall tax revenue.
Asian local government bonds are positioned to perform well in 2025, supported by accommodative central banks amid an environment of benign inflation and moderating growth. We expect Asian corporate and bank credit fundamentals to stay resilient, aside from a few sectors and specific credits which may be impacted by tariff threats or US policy changes.

Global market and economic outlook 2025

In 2025, US economic growth is expected to continue due to fiscal stimulus, despite above-target inflation. Meanwhile, the strong dollar could face disruptions, the Bank of Japan may keep raising interest rates and China is seen balancing domestic stimulus with potential US tariffs. European growth may recover slowly due to US tariff risks, and global central banks' policies will likely diverge to manage these challenges.

Japan equity outlook 2025

With Japan overcoming deflation and ushering in a period of progress and consolidation despite market volatility and political upheaval, we expect Japanese companies to make strategic decisions in 2025 that attract global investors in larger numbers.

Global multi-asset outlook 2025

Our outlook for 2025 is relatively positive. We expect the business-friendly stance of the Republican Party, coupled with easier monetary policy, will be supportive for risk assets, particularly in the US market. While we hold various views, we rely on our strategic asset allocation to guide our long-term outlook—with healthy equities, short-dated credit, the US dollar and gold forming our backbone for the medium term.

Asian fixed income outlook 2025

Asian local government bonds are poised to perform well in 2025 thanks to accommodative policies by central banks amid benign inflation and moderating growth. The global easing cycle is expected to lower global yields, thereby providing additional support to Asian bond markets.

New Zealand equity outlook 2025

As we head into 2025, we have picked three key elements that we believe will have the greatest influence over market behaviour and performance: interest rates, the strength of the New Zealand dollar and geopolitical uncertainty.

New Zealand fixed income outlook 2025

New Zealand's economy is faced with challenges including a weak currency, low productivity growth and slowed immigration. However, there are potential posi'tives, such as declining interest rates and possible gains in longer maturity bonds. Ultimately, recovery will require time and effort, with the central bank playing a crucial role.

Global equity outlook 2025

Throughout history, equity investors have benefitted from maintaining a long-term view and an optimistic outlook on humanity's ability to prevail in the face of adversity. This might once again be the case, meaning that the biggest risk might be not having exposure to the highest quality earnings streams through a diversified portfolio of global equities.

Singapore equity outlook 2025

While 2024 was characterised by broad market gains (or “beta” returns) in Singapore, we expect 2025 to be more centred on generating excess returns (or “alpha”). We believe the service economy, represented by financial services and transportation, will continue to contain key sectors which offer high sustainable returns, positive fundamental change and growth.

Global fixed income outlook 2025

We believe that a changing political environment could present opportunities across asset classes in 2025, with fixed income in particular poised to benefit as markets adjust to more realistic inflation expectations.

Asian equity outlook 2025

Many may expect the incoming Trump administration's transactional approach to be detrimental to the geopolitical and macroeconomic landscapes. However, we believe that Washington's mercantilist stance should not prevent Asian markets from offering attractive absolute returns, as was the case during the 2017-2021 period under Trump's first term.

Future Quality Insights: pandemic memories and ongoing impact on companies

We believe that investors should strive for a diversified global portfolio of quality companies that can thrive in an environment where the cost of capital may be higher than previously expected. Our collective experience of the pandemic reminds us that such an approach is a good idea.
We increased the overweight to growth assets given that economic data remains resilient against falling inflation and as global central banks lower interest rates. Regarding defensive assets, we have been relatively negative on sovereign bonds, and despite the rate-cutting cycle underway, we maintain this view.
During the first Trump presidency, China outperformed the S&P 500 and all the perceived beneficiaries of "China Plus One". While history may not be repeated, it is clear that China's domestic policy and market environment will become significant factors during Trump's second presidency.
We have adopted a more cautious stance on Thai bonds with the Bank of Thailand not expected to ease policy further following its interest rate cut in October. Elsewhere in the region, the reappointment of Sri Mulyani Indrawati as Indonesia's finance minister provides a positive medium-term outlook for Indonesian government bonds

Can the momentum shift on plastic pollution?

The highly anticipated Global Plastics Treaty carries high hopes as it will be the first attempt at forming a global legally binding instrument to address plastic pollution across its entire lifecycle. Tackling plastic pollution will be a long, bumpy road requiring international cooperation, stringent policies and significant financial investment to drive effective solutions.

New Zealand Fixed Income Monthly (October 2024)

The bond market has turned its attention to the likely size of further interest rate reductions now that the RBNZ has made two cuts to the Official Cash Rate in quick succession. Our view is that New Zealand's monetary policy is on track to revive the economy, although the recovery will take some time.

New Zealand Equity Monthly (October 2024)

The RBNZ's recent shift to a more dovish stance already appears to have buoyed New Zealand's equities at this early stage of the cycle, with examples including signs of strength in the retirement village and rental sectors, and the market has been delivering strong returns.
The Federal Reserve's interest rate cut in November was largely expected. However, Fed Chair Powell's comments pointed to changes in language, suggesting a shift towards a more uncertain policy, with inflation and employment trends influencing future rate adjustments.

As with the other markets, Japanese equities reacted immediately to Donald Trump's US presidential election win. The immediate election impact is expected to fade relatively quickly, with market focus turning to the trade policies Trump may pursue upon his return to the White House.

Balancing Act: Global Multi-Asset Quarterly (Q3 2024)

Volatility dominated risk markets in the early part of the July-September quarter, while perceptions of the US employment environment also had an impact. Over the quarter, we kept an overweight position on growth assets and maintained a neutral position on defensive assets.

After Trump’s win, fiscal policy and inflation risks in focus

Following Donald Trump's US presidential election win, in the near term we remain constructive on US growth and stocks, with the markets expecting corporate tax cuts and seeing a general penchant toward deregulation across industries as positive for earnings. In the longer term, we anticipate a rise in tail risks associated with fewer hurdles to fiscal expansion and higher US inflation.
The start of the Fed’s rate cut cycle was a boost to risk sentiment, with resilient US data and declining inflation placing the market in a goldilocks situation. Likewise, the start of a global rate cutting cycle sets up a positive environment for defensive assets.

Navigating Japan Equities (November 2024): view of lower house elections

In a move that reflected their disapproval of Japan's ruling coalition, voters deprived it of a lower house majority. While this outcome may not have a direct impact on the market, it is important to monitor the impact of political developments on economic policies in the short term.

Global Equity Quarterly (Q3 2024)

The markets suggest that growth will stay at a premium in the short term. Hence, our focus on Future Quality companies, especially those capable of taking market share as the economic backdrop worsens, may prove beneficial.
The market expects more rate cuts from the Fed, giving Asian central banks room to lower rates, which is very supportive for domestic growth. Meanwhile, with more China stimulus measures anticipated, we see asset allocation into Chinese equities picking up pace and lift the entire market.

Japan’s pivotal improvement in risk premium

Japan’s long history of undercompensating equity investors, a legacy of deflation, is coming to an end with its risk premium now achieving parity with that of the US. This historic shift is being driven by rising dividend payouts ratios, strong earnings and reasonable valuation of underlying equities.
The start of the Fed’s rate cut cycle has created room for monetary easing across Asia. We expect Asian government bond yields, particularly high yielders like those of India, Indonesia and the Philippines, to trend lower.

Navigating Japan Equities: Monthly Insights From Tokyo (October 2024)

This month we assess views in the market that the BOJ may have taken a dovish turn at its September policy meeting; we also point to further signs of a steady rise in wages and how that paves the way for a recovery in consumption and, ultimately, higher stocks.

New Zealand Equity Monthly (September 2024)

Nikko AM NZ released its first annual “climate statement” under New Zealand’s new climate-related disclosures regime in July. The framework requires approximately 200 organisations, including large publicly listed companies, to release reports on how their activities may impact the climate and the effect of the climate on their businesses.

Are China’s stimulus measures enough?

The raft of stimuli recently unveiled in China is the most coordinated policy since the start of the country’s economic downturn. This, along with the start of the Fed’s monetary policy easing, represents key fundamental changes. However, as the old saying goes, the devil is in the details.

Global Investment Committee’s outlook: low risk no longer

We perceive heightened risk to both growth (two-way) and inflation (upside) compared to our previous guidance. Nevertheless, our central near-term scenario remains for slowing but positive growth in the US, alongside slowly moderating prices.

Staying on the road less travelled

As global equity investors, we are often asked how we have successfully navigated an evolving market landscape since the strategy’s inception in 2014. The truth can ultimately be attributed to three key factors: humility, collaboration with people who share the same core team values and a robust investment philosophy.

Global Equity Quarterly (Q2 2024)

Perhaps there may be disappointment at the lack of money-spinning applications pertaining to AI which may cause investor sentiment to cool. Nevertheless, the improvements in earnings and cash flow appear sustainable so far and are certainly much more attractive than those being produced by many other parts of the economy.
For August we maintained our overweight growth position and a neutral position on defensives. Several factors continue to support our optimism towards growth assets, including the first rate cut from the Fed, earnings surprises remaining above their historic average, US economic growth beating expectations, and large fiscal spending globally.

What the Fed’s rate cut tells us about current financial conditions

The Federal Reserve’s 50 bps rate cut demonstrated the power of financial markets at present. As the markets had already priced in a significant probability of a 50 bps reduction, the Fed could have viewed such conditions as a good time to “buy insurance” and implement a half a percentage point cut while the markets were likely to absorb it well.

Less may be more in Japan’s LDP leadership contest

There is one major thing to keep in mind going into Japan’s upcoming leadership contest for the ruling Liberal Democratic Party (LDP)—the country’s looming general election. The ruling party’s chief concern is to select a candidate who can prevail at this election. This makes the candidacy of an incipient LDP leader more of a marathon than a sprint.
We believe that the biggest fundamental change for Asian markets in the medium term is a shift in the interest rates regime, notably that of the US.
In a positive bond market environment driven by global monetary easing expectations, we favour government bonds from India, Indonesia and the Philippines, where higher yields remain attractive to investors.

Navigating Japan Equities: Monthly Insights From Tokyo (September 2024)

This month we assess why the market is unfazed by Japan’s upcoming leadership change; we also explain how a bid for a prominent Japanese convenience store operator has highlighted how affordable domestic firms now look in the eyes of their foreign counterparts.

New Zealand Fixed Income Monthly (August 2024)

The Reserve Bank of New Zealand’s rate cut in August appears to constitute a slight easing of the brakes rather than a large change. With the Official Cash Rate at 5.25%, conditions are still restrictive. The first signs of recovery are likely to be seen in improvements in business and consumer confidence, but it will take some time for the impact to filter through to borrowers.

New Zealand Equity Monthly (August 2024)

In August the Reserve Bank of New Zealand lowered interest rates, marking the first change in the Official Cash Rate since May 2023. We expect New Zealand equities to be supported if the central bank maintains an accommodative approach.
As the November 2024 US presidential elections draw ever closer, we explore the global trade, economic and geopolitical implications from an Asian equity perspective, focusing on the uncertainties and opportunities that could arise if Donald Trump secures a second term in office.

Change as the only constant: investing in a world in transition

The Global Equity Team answers the following questions related to the key trends they see emerging: 1)does the AI investment theme still offer significant long-term potential? 2) will the market leadership broaden beyond technology names into other sectors? and 3) what are the main risks and challenges equity investors may face in the remainder of 2024?
For August we reduced our overweight on growth assets amid volatility in the markets and maintained a neutral position on defensives. We expect volatility to be quelled, given that the markets have factored in the Fed cutting interest rates in September and with more easing anticipated over the following 12 months.

Global Investment Committee review: still positive, with downside risk caveats

On 13 August, the Global Investment Committee held an extraordinary session to review the impact of recent volatile market movements. We maintain our central scenario for positive GDP growth in most major economies, although we see heightened downside risks to our US GDP growth outlook.
India remains the long-term growth story in Asia and continues to attract fresh investment flows. China, on the other hand, has become the value play waiting for positive catalysts to turnaround sentiment.
We expect the broader trend of easing global yields, prompted by expectations for the Fed to begin lowering interest rates, to support a downward bias in Asian bond yields. We continue to favour Indian and Philippine government bonds over their regional peers.

How to wean off a weak yen without fading Japan’s recovery

The weak yen has played a key role in Japan’s economic recovery by boosting its corporate profits, gross national income and current account surplus. However, it may be time to consider ways Japan can retain its recovery without help from a weak yen should the financial markets eventually change direction. The need for portfolio diversification and Japan’s structural reforms are some of the factors that could incentivise investors to trim their exposure abroad and reinvest domestically.