Evolving Markets

Nikko AM values companies based on their sustainable earnings capacity. Embedded in our research process is a consideration of all relevant risks that impact sustainable earnings and therefore have valuation implications. This obviously includes risk factors that fall within the ESG realm.

The S&P/ASX 200 Accumulation Index returned -1.8% during the month.

The Australian bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) was down 0.42% over the month.

The late celebrity chef Anthony Bourdain once remarked that “Singapore is possibly the most food-centric place on Earth, with the most enthusiastic diners, the most varied and abundant, affordable dishes — available for cheap — on a per-square-mile basis.”

The NikkoAM Asia ex Japan equities team focuses on two core characteristics in our fundamental research; sustainability of returns and positive fundamental change.

In my first article, I outlined our philosophy that ESG is fundamental to, and inseparable from, good investing. ESG is fully integrated into our investment process, because it is the right thing to do. We believe that one cannot claim to be a good fiduciary, mandated to create and preserve long-term wealth, while ignoring the principles of sustainable and responsible investing.

The MSCI AC Asia ex Japan (AxJ) Index fell by 1.02% in USD terms in August, largely on the back of currency weakness. Investor sentiments were driven by fears of an escalating trade war and risks of an emerging market contagion. During the month, the US Federal Reserve (Fed) left interest rates unchanged.

In August, the US Treasury (UST) curve flattened. Near-term yields rose due to expectations of a September Federal Reserve (Fed) rate hike, while mid to long-dated yields fell. Escalating US-China trade tensions and the weaker-than-expected July US jobs report pushed UST yields lower at the start of the month.

Our updated house view is that the G-3 and Chinese economies will continue solid through September 2019 approximately in line with consensus expectations, while we expect central banks to reduce their accommodation similarly to consensus expectations.

Wealthy individuals across generations are interested in investing for environmental or social impact, but Millennials are by far the most active in evaluating and indeed, demanding these strategies.

The Corporate Sustainability Department that Nikko Asset Management recently established embodies the Firm’s enduring commitment to integrating environmental, social, and governance (ESG) principles in every aspect of its operations.

The S&P/ASX 200 Accumulation Index rose 1.4% during the month.

The Australian bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) was up 0.81% over the month. The yield curve flattened as the spread between long-term and short-term bond yields narrowed.

In 2011 a dramatic shift occurred throughout the developed world — working age populations began a multi-decade decline. Demographic shifts like this in an economy can have profound effects, including changes in growth and debt metrics.

Confession season was eerily quiet leading into reporting season, unlike the noise from the Royal Commission and the incredible events out of Canberra, where another Prime Minister didn’t reach their full term.

Nikko AM Australia values companies based on their sustainable earnings capacity. That is, we determine the intrinsic value by capitalising the sustainable or mid-cycle earnings of every stock under coverage.

It was just reported that China’s exports to the U.S. accelerated 8% year-over-year in July while U.S. exports to China decelerated to 3% year-over-year.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

The macroeconomic issues that plague China are well known, but we believe that China is able to engineer a soft landing and to sustain growth, albeit at a lower level than it is used to.

After improving in the spring, the US trade imbalance is worsening again, especially vis a vis the Eurozone and China, with significant repercussions for international monetary and economic relations.

John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com

We entered the year optimistic, and with the knowledge of the last six months, we are pleased that most of our expectations worked out.