Investment Insights

 

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.

NZ market insights - Farmgate Milk Price Update

Supply-side shocks and market distortions have created a degree of uncertainty over the short to medium-term outlook for the New Zealand dairy industry.

Is Brazil in Crisis?

Brazil can no longer continue as “business as usual” and it is at an important crossroads as to whether it can exit the well-known “middle income country trap.” Domestic issues aside, EMs will continue to encounter major headwinds as an asset class in early 2015 due to negative stories from large countries, such as Brazil and Russia.

Finding Growth in Emerging Markets

These reforms coupled with strong balance sheets and demographics will support higher levels of global growth for decades to come.

Our Regional Equity and Asset Class Forecasts

The investment world is changing quickly and 2015 should prove to be a very interesting year, but we see no reason to change our long-held positive view on global equities.

Fed "Baby Steps" and "Sneaky Sovereign" ECB QE

Recently, two major voices in the "core Fed" (Fischer and Dudley) have indicated that despite low inflation, the Fed's main scenario is to begin hiking rates in mid 2015.

China's Re-stimulation and Emerging Market Divergence

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.

G-3 Economies Should Surprise in 2015

Our Global Investment Committee always seems to meet in the middle of great volatility, and this time was no exception, with the investment world facing all sorts of new challenges.

Abenomics the Winner in Japan's Election

In our view, the LDP coalition's maintenance of a strong two-thirds majority in this election will greatly help Prime Minister Abe and his party's reform efforts, while likely bolstering Yen weakness to some degree.

Capitalising on the 'Pacific Decade'

Capitalising on the 'Pacific Decade'

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.

Identifying the key themes for tomorrow's Asia

Asia is evolving rapidly, which has implications for investors globally. It should no longer be viewed as just a cheap manufacturing hub, but a region with high value-added industries catering to an increasingly wealthy middle class.

Active management of credit more effective over the longer term than a target-seeking strategy

As we move further away from the turbulent period between 2007 and 2009, interest in credit has increased rapidly as investors globally search for extra return in a low yield environment.

Rate cuts down under?

If the RBA does cut interest rates, it is likely that they will make more than one cut, so we could see Australia's official cash rate at 2.00% by the second quarter of 2015.

Revisiting the age-old debate on value vs growth investing

Revisiting the age-old debate on value vs growth investing

Many empirical studies have shown that a value style approach to investing in Australian shares has consistently outperformed growth investing - and with less risk.

Recession in Japan? 3 Key points to remember (again)

The three main points from our prior report on this topic have not changed; however, there are a few more anomalies in the data this time.

Green Bonds Go Mainstream

2014 has become a landmark year for green bonds, having become one of the few sustainable investment instruments to reach a suitable scale and poised to enter the mainstream for global institutional investors.

Japan's Profitability: "Show Me the Money" Corporate Governance

Japan's Profitability: "Show Me the Money" Corporate Governance

Equity investors should not fret too much about weak macro data, as Japanese companies have been able to overcome such for nearly a decade through rationalization and improved corporate governance.

Liability driven investing. Not just for institutions; It can work for individual investors too

The ultimate beneficiary of most of the manager's investment decisions is an individual investor with particular needs and requirements. This may sound obvious, but actually it often gets ignored.

Point of View: On Moody's Japan Rating Downgrade

Moody's downgrade of Japan to A1 will likely have very little effect on bond yields, the economy or risk-asset psychology. The major reason why is due to its odd premise of predicting too much success of Abenomics, while most market observers are not so optimistic.

Recession in Japan? 3 Key points to remember

Three important things to know about the recently announced Japanese GDP statistics that indicated that the country was in a recession.

Know your investment manager: They may not be as passive or active as you think

The argument within the investment community over which offers better results continues to rage. However, we think that a more important question is being missed—are investors getting what they expect from the two investment styles?

Debunking Demographics

We examined the relationship between a country's working age population and its listed company corporate earnings for ten nations, and found that the relationship is ambiguous at best, with correlations ranging from positive to strongly negative.

US mid-term elections: Republican control of Congress likely to lead to gridlock with President

Although there are potential flashpoints, there are some areas where the US President may be more willing to cooperate with the new Congress — such as being awarded the authority to fast track trade agreements, particularly the Trans Pacific Partnership (TPP)

Japan’s Key Factor: the Wealth Effect

We have long reported on the role of the wealth effect, as its importance is vastly underestimated by local and foreign investors. The 2Q data for net financial assets shows a QoQ increase to a new historical high.

Official Support for Japan’s “Show Me the Money” Theme?

Update on Japan’s “Show me the Money” corporate governance — the dividend paid by TOPIX continues to rise towards its historic high, but the payout ratio has been stagnant for the past few months, as earnings continue to rally equally well.

Changing of the guards in Asia

Is political democracy good for economic growth and ultimately, stock markets in Asia? Indisputably, sound political systems are crucial for economic development and progress.

Our View on the Recent Market Turbulence

Our house view is that non-economic factors played the largest role in the recent market turbulence. We discuss these below and forecast their future development.

Australian Fixed Income: Credit Commentary - October 2014

Physical credit spreads have remained at reasonably tight levels due to the ongoing search for yield — although global uncertainty in the Middle East, fears about Ebola, and re-emerging concerns about Europe have generated negative sentiment.

Australian Fixed Income: Market Commentary - October 2014

The Australian economy seems to be struggling to achieve traction as the mining boom transitions from a capital expenditure phase to a shipment phase.

No sovereign bond bubble but perhaps a new conundrum

Prior to the global financial crisis, nearly $17 trillion of developed nation bonds were rated AAA. Now there are less than $2 trillion. Not only has supply been restricted, but also diversity, with the number of AAA rated countries falling from 15 to 9.

Australian Equity: Market Commentary - September 2014

A confluence of factors worked against the Australian market during the month. Regulatory concerns in the banking sector, lower commodity prices and a weaker Australian dollar were the key drivers of the market’s underperformance.

China Worries Continue

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

Australian Fixed Income: Credit Commentary - September 2014

In the Australian credit market, the relative lack of supply compared with demand continues to cause spreads to tighten in the physical market offsetting the risks of an unstable geopolitical environment.

Australian Fixed Income: Market Commentary - September 2014

Reasons for the recent weakness in the AUD include a fall in the iron ore price, the rally in the US dollar, weaker Chinese data, and indications that the Reserve Bank of Australia is considering macroprudential controls.

Japan's “Show Me the Money” Corporate Governance

Improving the number of independent directors and other governance issues are very important in the intermediate term for Japan, but it is crucial for investors to understand that much of the profitability message has already been understood by Japanese corporate for nearly a decade.

Super-Abenomics Key Performance Indicators - September 2014

Japan’s pipeline inflation, which we measure using the recently renamed Producer Price Index’s Finished Consumer Goods for Domestic Demand sub-component continued to be quite depressed in August.

Japan: CY14 GDP Should Exceed Consensus

Japan’s 2Q GDP growth, at -7.1% QoQ SAAR, was far below June’s consensus of -3.1% (and our -2.5% estimate) and we need to reduce our CY14 forecast, but not by much and we remain more optimistic than consensus.

Equity Markets - September 2014

Although not a Goldilocks scenario, our forecasted macro-backdrop is quite positive for global equities.

Bond and Currency Targets - September 2014

G-3 bond yields rose less than we predicted, mostly due to continued ECB aggressiveness, worries about the Chinese economy and the decline in oil prices.

Central Bank Watch - September 2014

Sentiment about Fed policy remains very volatile, but Yellen has remained remarkably stable in her outlook and bond prices have remained under control during the transition away from ultra-accommodative levels.

G-3 Economies Should Be Fine

Nikko AM’s Global Investment Committee met on September 26th and updated our house view on the global economic backdrop, financial markets and investment strategy advice. In sum, there certainly are some worrisome issues, as always, but we find none of them convincing enough to halt the upward momentum in equity prices.

Australian Fixed Income: Credit Commentary - August 2014

Credit spreads generally continued to tighten in August, although Australian physical spreads were mainly flat over the month.

Australian Fixed Income: Market Commentary - August 2014

At its 2 September meeting, the Reserve Bank of Australia again left the official cash rate on hold at 2.50%, and the Australian Industry Group’s Performance of Manufacturing Index slipped back into negative territory in August, following a brief stabilisation in July.

Super-Abenomics Key Performance Indicators - July 2014

Domestically produced goods and imported finished consumer goods both rose mildly MoM. This must be causing much doubt at the BOJ about achieving the 2% Core CPI target.

Update on Eurozone External Accounts

As for the entire Eurozone, its trade surplus in goods and services remains near record highs, but it is not increasing further, so it is no longer supportive of GDP growth.

Update on GIIPS' External Accounts

Regarding our long-standing theme of rebalancing in the Eurozone, recent trends have been more negative, so we offer this summary with some relevant charts.

Japan's Dividend Resurgence: “Show Me the Money”

Last month we described Japan’s “Show me the Money” corporate governance as regards the sharp rise in corporate profit margins to new highs. This theme is paralleled by the trend in dividend payments.

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