Insights

The future of US policy is surrounded by great uncertainty, particularly regarding tariff measures that the US may impose upon its trading partners. We explore options that are available to Japan to safeguard against tariffs the US may decide to implement.

Despite concerns about Donald Trump's impact on emerging markets, historical data shows that during his first term as US president, China, South Korea and Taiwan outperformed the S&P 500 although they are the most trade-sensitive equity markets.

We expect Asian local government bonds to perform well in 2025, supported by accommodative central banks amid an environment of benign inflation and moderating growth. The ongoing global easing cycle is expected to lower global yields, further supporting Asian bond markets.

Following the surprise result of the snap election in October 2024, Japanese politics has entered a very unique phase. We discuss how the fluid political situation could positively impact the Japanese market, which is already feeling the benefits of corporate governance reform, and assess how engagement could play a role in improving shareholder returns in such an environment.

This month we discuss how a rise in delistings reflects efforts to create a more attractive equity market; we also assess ways in which a merger by large automakers in Japan could stimulate reforms beyond the industry.

We retain our positive view on growth on resilient economic data and dovish monetary policies globally as inflation starts to ease worldwide. As for defensives, sovereign bond curves are steepening amid the beginning of the global rate-cutting cycle and bonds are gradually becoming more attractive.

The Fed and the BOJ both made interest rate decisions that were in line with market predictions, with the former cutting interest rates and the latter standing pat on policy. However, uncertainty around future policies and potential impacts of U.S. fiscal and trade policy changes have led to market volatility.

Our comprehensive analysis of the Yanagi Model, which provides an example of how sustainability issues have become a key part of corporate governance practices, showed that ESG integration can drive shareholder value. The significant correlations found, especially in social and governance factors, require our attention; moreover, the analysis shows that integrating ESG factors is essential for long-term value creation.

In what has turned out to be an eventful year for interest rates, one of the major factors for New Zealand's bond market in 2024 has been the impact of monetary policy. We expect the Reserve Bank of New Zealand to continue monetary easing in 2025. In addition to monetary policy, the forthcoming Trump presidency will be another key factor for the bond market in the coming year.

The Reserve Bank of New Zealand began cutting interest rates late in 2024 and is anticipated to ease further in 2025. The interest rate environment is expected to be a positive factor for the equity market, which has seen the retail and property sectors suffer in particular under higher rates.