Insights

In June, New Zealand’s equity market performance largely reflected ongoing weakness in the country’s economy, with defensive stocks acting as the main drivers of performance.

With uncertainty over tariffs, geopolitical disruption and the paths taken by central banks continuing to impact global markets, it may be instructive to look back at the RBNZ’s last monetary policy decision as we try to determine the future direction of interest rates.

This month we assess how Japan losing its place as the world's largest creditor in fact underscores the country's transformation over the years; we also discuss the recent crude oil market disruptions from a Japanese market perspective.

Sharia-compliant bonds, or to give them their official name, “sukuk”, are often dismissed as faith-based instruments with limited appeal outside of Muslim-majority markets. However, this misses the opportunity they present for global fixed income investors seeking diversification, resilience, and sustainability.

With slowing growth and an ongoing trade war to handle, China appears to be in a crisis management mode. However, the country is at an inflection point where major structural shifts are occurring as it strives to climb up the technological value chain to achieve self-sufficiency via innovation and resourcefulness.

The GIC assesses that the probability of slower yet positive growth in the US has increased. The GIC anticipates a narrower growth gap between the US and other developed markets, with selective diversification into European and Chinese equities potentially paying off. The GIC believes that the risk premium offered by Japanese equities is now competitive with that of the US, although trade-related uncertainty is expected to linger.

US exceptionalism has faded from view recently, supporting an exodus from US assets. However, our stance remains that the US is core to our investment thesis, allowing us to remain part of the secular growth trend in technology innovation not found elsewhere in the world.

We continue to believe that Asia's local government bonds are positioned to perform decently, supported by accommodative central banks amid an environment of benign inflation and moderating growth.

The Fed maintained interest rates at its June meeting, signalling a slightly more positive economic outlook. Despite easing of some risks, uncertainties remain elevated, with inflation still a key concern. FOMC members' varied rate projections reflect heightened uncertainty in the economic outlook.

Japan's corporate governance landscape is continuing to evolve, highlighted by increases in shareholder activism and unsolicited takeover offers. The reforms initiated over the past decade have led to a more open corporate climate, and there is a shift towards a more competitive and value-driven market environment in Japan.