Asia-Pacific

Investment Insights by our experts and thought leaders

Fed Normalization, but not ECB or BOJ

We only expect mild further easing ahead, especially as the ECB does not wish to cause a rupture while the Fed is hiking rates.

We forecast that Asia Pac ex Japan, Japan and Europe will outperform in the next six months, while the US should underperform and, thus, deserve an underweight stance vs. all other regions.

Japan's revised GDP: No Recession as Inventories Finally Realistic

Looking forward, even though inventories were revised higher, their long depletion means they remain far too low in my view, and should continue start to rise significantly in the quarters and years ahead.

What's to come? - China's RMB as a global reserve currency

The IMF's decision to include the Renminbi into the SDR is a major push for the RMB to become one of the world's major reserve currencies.

Australia: Lower GDP growth and CPI should mean lower 10-year bond yields

Our lead Australian fixed income portfolio manager discusses her intermediate-term outlook for the bond market “down under.”

Economic Disappointment in Japan Should not Worry Equity Investors

Once again, as has long been our view, disappointing macro-data should not worry investors in Japanese risk assets very much at all.

Asia ex-Japan Equities - Historic Price to Book Valuation buying opportunity emerges

Developed and emerging markets in Asia ex-Japan have clearly been under tremendous pressure in recent months, including redemptions of more than USD 50bn from the region in September, the heaviest ever witnessed.

Why the BOJ does not need to ease much, if at all

There are many reasons for the BOJ to defy consensus expectations for more easing.

Abenomics 2.0: Focusing on Women’s Participation

There is an admirable effort to improve the female participation rate, but it is too early to judge whether the measures will have a major effect.

Valuation in a Post-QE World

Markets and economies are still being dictated to by unprecedented levels of monetary stimulus. We believe in building a portfolio of companies that are more likely to flourish in the growth environment beyond 2015.

Japan's "Show Me the Money" Corporate Governance - September 2015

We explain how Abenomics is the "icing on the cake" of corporate governance improvement over the last decade.

Fintech Evolution in China

The internet revolution is coming to the financial sector, addressing inefficiencies in current system and business models. In China’s case we are witnessing a combination of financial liberalisation with an internet revolution in the financial sector.

Zooming in on the Pacific Decade: China's Devaluation

A concentrated, stock-picking approach is the best way to serve a long-term investor's goal of capital appreciation

US rate rises unlikely to have significant impact on 10-year Treasuries

Even though the current term premium on US Treasuries seems too low, it is unlikely to rise significantly unless offshore bond yields start to rise.

Capitalising on the Pacific Decade: Taking the long-term view on China

For investors outside China, whether they have holdings in Chinese shares or not, coming to a coherent investment view on the country has become imperative as it exerts an ever-increasing influence on global markets.

Economic Disappointment in Japan? Key points to remember (again)

As has long been our view, disappointing economic data should not worry investors in Japanese risk assets very much at all.

Why did China devalue the renminbi?

While RMB weakness will likely persist for a few months, we don't expect the currency to devalue more than 10% versus USD and we maintain our confidence that the currency will be included into the IMF SDR basket in a year from now.

Abe administration's 2015-version growth strategy: Focus on productivity

We will be watching to see how companies respond this year to the Corporate Governance Code, specifically the twin issues of selling cross-shareholdings and improving capital efficiency.

India: Our Debate on Key Issues

India is a key market to watch in the coming years. Our expert on India, Andrew Holland, CEO of Nikko AM's joint venture there, discusses with Simon Down of our UK fixed income team the forecast for reforms in the country, with some surprising conclusions.

Iron Ore: Supply has arrived but where is the demand?

What lies ahead for iron ore prices, particularly with the Chinese economy slowing and undergoing a transition away from a materials-intensive economy to a consumption-driven economy?

Views on the China equity market selloff – from an Asian Fixed Income perspective

The sharp equity market correction in recent weeks after a very strong run over the past year will not have a crisis-level impact to the broader economy.

The Implications of the RMB Inclusion in the IMF SDR

The IMF has been supportive of China's attempt to be included, but has not indicated that it recommends it. Furthermore, there is a risk that most of these reforms are too new for the IMF to judge whether they are effective or sustainable.

China: Now and tomorrow

Nikko AM Asia views the recent corrections in Chinese equities, particularly in the onshore markets, as healthy given the sharp increases in value that had occurred due to a frenzied retail market intoxicated by relatively cheap margin financing.

Japan's “Show Me the Money” Corporate Governance - June 2015

We expect that profit margins will expand further in coming quarters, driven by a large corporate tax cut and continued industry rationalizations that further prove that Japan's structural profitability trend continues upward.

Did Asia's Central Banks Engage in the Global Currency War?

Since the Fed starting hinting at the normalization of interest rates a year ago, Asian central banks' foreign reserve accumulations - except for India and Hong Kong - have either incurred substantial losses or remained flat.

Japanese Overseas Equity Exposure Rising

We expect that Japanese pension funds will continue to shift their investments into risky assets in 2015.

China's LGFV debt swap – Shining light on the Shadows

The importance of President Xi Jinping's strong leadership cannot be stressed enough. Under him China is undergoing dramatic changes. While the most thorough cleansing of state corruption is ongoing, elements of China's grand strategy are becoming more evident both domestically and on the global stage.

Market isn't overheating even after Nikkei touched 20,000

The market isn't overheating even though the Nikkei stock average touched the 20,000 level, nor do we believe that overseas markets are overheating right now.

The New Governance Code – What impact will it have on Japanese companies?

Due to the developments described in this article, there is ample room for growth at Japanese firms and much opportunity for investment success.

Our View on the Crucial Chinese Property Market

Given the significant proportion of real estate investment as a percentage of GDP, as well as the proportion of local government revenue generated from land sales, the property market remains a crucial driver of the Chinese economy.

March Tankan Report Commentary

The March “tankan” survey results are not expected to lead to the BOJ's further acceleration of QE.

G-3 Economies Should Rebound Nicely

In sum, there certainly are some worrisome issues, as always, but we find none of them convincing enough to prevent moderate increases in equity prices.

China's Outlook and now Positive on Emerging Markets

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

Central Bank, Inflation, Currency, Commodity and Bond Forecasts

Central Banks: Despite firm economic growth, we believe that a negative YoY CPI through September will steady the Fed's hand.

Regional Equity and Asset Class Forecasts

Coupled with our expectation for global bond yields to rise moderately, we maintain our overweight view on global equities vs. bonds.

Japanese Equity: Improved Export Data May Indicate Turning Point for Japan

The recovery in profits by Japanese export firms should continue to attract the attention of the markets in the first half of 2015.

Japan's Successful “Show Me the Money” Corporate Governance

John Vail updates his long-standing theme: Japan's Successful “Show Me the Money” Corporate Governance.

Economic Disappointment in Japan? Key points to remember (again)

The disappointing economic data should not worry investors in Japanese risk assets very much at all.

Australia: Japanese and European QE likely to subdue bond yields and increase currency market tensions in 2015

The key theme of the past few years has been quantitative easing. Although the US has come to the end of its version of this experiment, QE programmes have begun or are about to begin in Japan and Europe.

Preparing for the Next Phase of Global Evolution: More People and Bigger Cities

Preparing for the Next Phase of Global Evolution: More People and Bigger Cities

We expect the next phase of the global evolution to be driven by a growing global population, rapid urbanisation and for most of it to happen in emerging markets with increasing focus on "green" development.

What will happen to US Treasuries if Japanese government bond yields go to zero?

In a pre-GFC and pre-QE world, zero or negative interest rates on a German, Japanese or US 10-year bond would have been considered highly implausible. However...

Steel and Iron Ore Deflation to Continue

The steel industry and its underlying iron ore industry are witnessing excess production and deflationary forces that are similar to the global energy markets.

BOJ Indicates a Move Towards "True Core CPI" More Globally

Now that oil prices have declined, if a central bank targets its overall CPI at 2.0% for 2015, it would likely be labeled as being overly aggressive and perhaps attempting to unfairly weaken its currency.

Will China Provide Global Liquidity Soon?

As the Fed continues to unwind its stimulus, even amidst threats of global deflation, there are hopes that China will accelerate the liberalization of its capital account and take over the Fed's role as the global supplier of liquidity.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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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Nikko AM has been certified as carbon neutral for the first time, after entering into a carbon offset programme with the UK-based international organisation Carbon Footprint Ltd.

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