James Eginton provides his insights on the economic transition in China following a recent research trip to the region. The transition from a reliance on infrastructure investment to consumer spending - perhaps the largest the world will ever see - has significant implications for global growth.
Nikko Asset Management's Global Investment Committee met on December 8th and updated our intermediate-term house view on the global economic backdrop, central bank policies, financial markets and investment strategy advice.
The IMF's decision to include the Renminbi into the SDR is a major push for the RMB to become one of the world's major reserve currencies.
A concentrated, stock-picking approach is the best way to serve a long-term investor's goal of capital appreciation
The internet revolution is coming to the financial sector, addressing inefficiencies in current system and business models. In China’s case we are witnessing a combination of financial liberalisation with an internet revolution in the financial sector.
For investors outside China, whether they have holdings in Chinese shares or not, coming to a coherent investment view on the country has become imperative as it exerts an ever-increasing influence on global markets.
While RMB weakness will likely persist for a few months, we don't expect the currency to devalue more than 10% versus USD and we maintain our confidence that the currency will be included into the IMF SDR basket in a year from now.
The sharp equity market correction in recent weeks after a very strong run over the past year will not have a crisis-level impact to the broader economy.
The IMF has been supportive of China's attempt to be included, but has not indicated that it recommends it. Furthermore, there is a risk that most of these reforms are too new for the IMF to judge whether they are effective or sustainable.
Nikko AM Asia views the recent corrections in Chinese equities, particularly in the onshore markets, as healthy given the sharp increases in value that had occurred due to a frenzied retail market intoxicated by relatively cheap margin financing.
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.
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.
Much as we expected, China's economy has continued to slow faster than consensus, but does not appear to be in a hard landing.
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.
China's economy likely slowed much more than the official statistics show; otherwise, the government would not have reversed course on its various crackdowns, especially on the property market.
The Asia-Pacific region is evolving and reforming rapidly, both in terms of developing and developed countries. Over the course of the next 10 years, Asia-Pacific, including Japan, will become a default allocation in investor portfolios.