Insights

Considering that major tech companies are profitable, cash rich and cannot afford to lose out in the highly competitive AI race, spending on high-end computing and neural networks looks set to continue in 2024. This will likely create a lasting boon to many component suppliers (the so-called picks and shovels of AI) across Asia.

The just-released 3Q CY23 data on Japan’s aggregate corporate profits was a bit mixed, but the overall corporate recurring pre-tax profit margin surged to a record high on a four-quarter average. The non-financial service sector rose to another record high, but the manufacturing sector fell further from its record high.

We have held on to our view that the “higher for longer” narrative is not necessarily bad for equities, as robust earnings are supported by a US economy that continues to grow at above-trend rates. However, we are also sympathetic to the de-rating process where earnings look simply less attractive compared to higher rates across the yield curve.

In the transition to net zero, the focus is on impact and engagement. We are actively engaged in the global fixed income markets, and support green and sustainable investments in the transition towards overall sustainability in order to meet net zero targets. We are particularly trying to focus on those companies with ambitious targets for net zero and carbon reduction.

We expect macro and corporate credit fundamentals across Asia ex-China to stay resilient with fiscal buffers, although slower economic growth appears to loom over the horizon.

The last few quarters have been a good reminder that we are in a changing world. As a result, we need to focus always on investing in enduring franchises and we would suggest that our Future Quality approach is soundly placed in that regard. We also need to approach monetary policy with an open mind—sometime soon the central banks could change the game again. In surfing parlance, be ready with your trusted board and make the most of the conditions.

Recently many fixed income investors have experienced steep price declines in their bond portfolios. We have argued that it is not only duration that explains the interest risk of a portfolio, but that convexity needs to be accounted for as well. In this paper we point out that credit risk measures also have to be adjusted in an environment of declining bond prices.

The emergence of Sustainable Bonds as an asset class has been relatively rapid, and the spectrum of different classifications of investments can naturally be confusing for investors. Here we outline some of the key criteria for investors to look for when investing in Green, Social and Sustainability Bonds (GSS).

In one of the most significant changes surrounding New Zealand’s equity market in recent years, the general election held in October delivered a change of government. Overall business sentiment has been generally positive after the election result. The outcome has been favourable for the aged care sector and building-exposed names. On the other hand, it has thrown up some uncertainties over the future of New Zealand’s environmental policy.

The general election held in October resulted in a change in government for New Zealand. Although it is difficult to gain a full picture at this stage, we can make some key observations on monetary policy: the Reserve Bank of New Zealand’s mandate could be pared back to ensure that its sole focus is on managing inflation.