Investment Insights

We believe that the recent rise in New Zealand’s interest rates has put the bond market in a good place, as the alternative may have been a negative interest rate regime instead. Without higher interest rates the government would have found it difficult to fund itself, as the country’s bonds may not have otherwise been attractive to offshore investors.

After many years of trying to stimulate inflation, central banks are now facing inflation levels that are far exceeding recent trends. In May, eurozone inflation rose to 2% and in the US core inflation reached 3.8% (almost a 30-year high).

The 2007-2008 global financial crisis had a lasting impact on public and private pension funds, as the collapse of Lehman Brothers and massive fraud committed by Wall Street money manager Bernie Madoff placed greater emphasis on fiduciary obligations and manager due diligence.

Grace Yan, a Senior Portfolio Manager and a member of the Nikko AM Asian Equity Team, talks about the underlying reasons behind her recent success in winning Citywire Asia’s Best Fund Manager award and her passion about uncovering hidden gems in the Asian small-cap equity arena.

Despite very bumpy economic data—particularly on inflation—rates have compressed, implying most of the “surprises” have already been priced in. This is positive for growth assets that respond better to yield curve stability than the sudden steepening that defined the first quarter.

Supported by optimism about the region’s ongoing economic recovery, Asian stocks delivered decent gains in May, shrugging off concerns about a spike in COVID-19 cases in several Asian countries and persistent worries about inflation.

US Treasury (UST) yields traded in a relatively narrow range in May. Inflation fears resurfaced, prompted by rising commodity prices and a marked increase in headline consumer and producer price indices in the US.

We believe that Asian REITs will continue to perform well while the economic recovery in Asia and the rest of the world remains strong and as long as the rise in bond yields do not become excessive.

We explain why corporate earnings in FY21 are expected to begin reflecting recovering confidence among Japanese companies as vaccine rollouts gain momentum. We also look into the BOJ’s trial run for a digital yen and the impact such a currency could have on the economy and markets.

Who hasn’t sat at home, shouting at the TV as a contestant on a quiz show offers up a hopelessly wrong answer? Incredulity, frustration and a sense of helplessness are all common emotions in that situation. At least you normally get a good laugh at the end of it.

With the recent rise of nationalism in China, many foreign brands operating in the world’s second largest economy are now treading very carefully in their marketing campaigns and public communiqué.

While the Japanese equity market managed to strongly rebound in 2020 after a sharp fall at the start of the pandemic, it has lagged its peers in 2021 amid the country’s struggle to contain COVID-19 and its slow rollout of vaccinations.

Until recently, Japan was lauded as one of the few countries that successfully limited the COVID-19 outbreak. However, more than a year into the pandemic, Japan’s slow vaccine rollout is coming under increased scrutiny with the country lagging far behind its G7 peers in vaccinations.

The US Treasury (UST) market has been an important barometer of the reflation trade for markets this year. Most asset classes have performed in line with movements in UST yields as correlations, whether positive or negative, remain strong.

Asian stocks turned in decent gains in April on optimism about the region’s economic recovery, especially after China and several other Asian countries reported better-than-expected 1Q21 GDP growth. The MSCI AC Asia ex Japan Index gained 2.5% in US dollar (USD) terms over the month.

US Treasury (UST) yields stabilised in April. Yields came off despite domestic data confirming that the US economy had gained momentum, and inflation numbers that were above market expectations. The Federal Open Market Committee statement announced no new changes to the direction of monetary policy but offered a more upbeat tone on the outlook.

"Nowadays people know the price of everything and the value of nothing", quipped Oscar Wilde.

We gauge Japan’s slow vaccine rollout from an economic perspective and assess the shift in work styles that occurred during the pandemic and its potential impact on real estate prices.

Exhibiting an extensive track record of outperformance versus big caps and offering good diversification from traditional equities, we believe that Asian small-cap stocks provide numerous investment merits for long-term investors.

The striking 52% year-on-year surge in prices of second-hand US vehicles has, as expected, caught market attention, with global chip shortages often blamed for the disruption in the market for used cars. Behind the scenes, however, stands Joe Biden, the US incumbent president, whose first 100 days in the office was marked by several milestones, some of which could quite convincingly add more “meat” to the story.

Our philosophy is centred on the search for “Future Quality” in a company. Future Quality companies are those that we believe will attain and sustain high returns on investment. ESG considerations are integral to Future Quality investing as good companies make for good investment.

Emerging Markets (EM) debt began 2021 by consolidating after an exceptional performance at the end of 2020. The negative performance was mostly driven by a widening of US Treasury yields while spreads remained broadly unchanged.

The global credit market saw a positive start into the year in Q12021 as spreads continued to tighten. However, total returns were negatively impacted by the global move toward higher rates. At the beginning of 2021, cyclical sectors came back to the forefront and outperformed. Energy and automotive sectors were among the winners, while utilities lagged the rally.

As reflationary dynamics gain support from refreshed stimulus in the US and a largely successful vaccine rollout with returning growth already to show for it, the reflation trade appears a bit exhausted as measured by market action. However, we see the current dynamic more as a pause than a conclusion.

The UST yield curve steepened further in March as stronger-than-expected domestic economic data prints, passage of the US dollar (USD) 1.9 trillion stimulus package and a ramp-up in the rate of US vaccinations amid slowing daily infection rates prompted investors to increasingly price in accelerating growth in the coming quarters.