Evolving Markets

Investment Insights by our experts and thought leaders

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.

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.

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.

G-3 Economies Should Continue Rebounding

We believe the global economy should be quite firm for the next year, but not so strong as to cause inflation concerns.

Central Banks: Our Logic For Fed Hiking Three Times This Year

We have a non-consensus, but completely sound call for a more aggressive Fed, whereas we expect the ECB and BOJ to maintain their current aggressive easing program.

Forecasts for Stronger USD and Moderately Rising Global Yields

Despite good global economic growth, other commodity prices will likely remain quite flat in our view, partially due to a stronger USD.

Asset Class Forecasts: Maintain Overweight Global Equities

We calculate that equity valuations are at fair levels and that stocks can grow along with earnings.

Will US rate hikes weigh on risk assets?

Real yields and inflation expectations currently suggest exceptionally low growth and low inflation far out into the future.

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.

Does the price action of bunds signal an end to ultra low rates?

We do not expect the recent steepening of the bund yield curve to be the beginning of a sustained new trend. Moreover, Eurozone and German economic data, albeit improving, are not sufficient to support the higher bund yields on a sustained basis.

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.

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.

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.

European Property: Does it Signal Global Deflation?

Through 2014, one of the largest asset classes in the world was virtually unnoticed as an indicator that Europe is not pushing the global economy into widespread deflation.

Will European QE deliver on Earnings expectations?

There are several credible reasons to expect that QE will boost corporate earnings in Europe, though by not as much as in the US. However the risk of disappointment relative to inflated expectations remains high.

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.

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.

Implications of the ECB's quantitative easing program for interest rates and currencies

ECB's QE: The major question is, will this program work given the European model of debt creation is via the banking system and not the bond markets?

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.

ECB Success but with Caveats

The QE announcement was a major step forward for Eurozone. It is not without dangers and questions about implementation, however, so markets should not get over-enthusiastic about it.

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.

Reasons for an Oil Price Rebound

We expect oil prices to rebound and for the time being, we will stick with our call for Brent to rebound to $72 by end-June 2015, although $65 is a more plausible goal.

Is Brazil in Crisis?

Brazil can no longer continue as “business as usual” and it is at an important crossroads as to whether it can exit the well-known “middle income country trap.” Domestic issues aside, EMs will continue to encounter major headwinds as an asset class in early 2015 due to negative stories from large countries, such as Brazil and Russia.

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.

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.

Debunking Demographics

We examined the relationship between a country's working age population and its listed company corporate earnings for ten nations, and found that the relationship is ambiguous at best, with correlations ranging from positive to strongly negative.

US mid-term elections: Republican control of Congress likely to lead to gridlock with President

Although there are potential flashpoints, there are some areas where the US President may be more willing to cooperate with the new Congress — such as being awarded the authority to fast track trade agreements, particularly the Trans Pacific Partnership (TPP)

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.

Our View on the Recent Market Turbulence

Our house view is that non-economic factors played the largest role in the recent market turbulence. We discuss these below and forecast their future development.

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.

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