Insights

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.

A trade deal was finally struck between the US and Canada that combined with the Mexico deal has been rebranded as "USMCA", though it could aptly be described as the same old NAFTA with a few tweaks.

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.