Insights

Investment Insights by our experts and thought leaders

Energy security and Future Quality

Our Future Quality investment philosophy revolves around identifying companies that have pricing power, possess management teams that invest will appropriately, boast strong balance sheets and offer opportunities that are not yet priced in by the market. This approach will remain constant in 2024 although we are also acutely aware of the significant impact energy security will have on global decarbonisation efforts.
The Indian market remains attractive. It has the highest earnings growth in the Asian region, valuations that are in the middle of its historic range and an economy that is growing strongly with inflation under control.

New Zealand Fixed Income Monthly – January 2024

Despite continued struggles with inflation in New Zealand and elsewhere, our view is that the RBNZ’s next change to the OCR is likely to be downward, albeit at a later timing than the market has recently been expecting.

New Zealand Equity Monthly –January 2024

We view 2024 with optimism—markets could begin to be driven by company earnings rather than by inflation outcomes and interest rate expectations as they have in the past year, and New Zealand’s market is well placed to shrug off volatility experienced in 2023.
We expect an anticipated decrease in developed market bond yields, coupled with enhanced foreign inflows, to bolster demand for Asian bonds. We see Asia credit remaining well supported with subdued net new supply as issuers continue to access cheaper onshore funding.

Unlocking fixed income biodiversity opportunities: NWB Bank

While bond issuers have embraced the opportunity to help fund the transition toward carbon neutrality, the issuance of nature and biodiversity-related bonds remains more limited. However, biodiversity bond issuance is beginning to move from niche to mainstream.

The Future Quality approach to navigating the AI arms race

The emergence of AI has dramatically shifted the future pathway for the technology sector, and our research has found that this emerging structural trend chimes with our Future Quality principles.

Navigating Japan Equities: Monthly Insights from Tokyo (February 2024)

This month we discuss how emerging growth narratives such as semiconductors may come into focus in 2024; we also assess the slightly hawkish turn the BOJ took at its January policy meeting.

Japan’s reform measures pave the way for an exceptional 2024

Last year, global investors turned their attention firmly towards Japan as a way of increasing their Asia exposure while avoiding perceived geopolitical and regulatory risks linked to China, and amid the high inflation environment dominating western economies. But this year, Japan’s success is more based on its own merits.

The US economy continues to look robust, so we have stayed constructive on growth assets and short maturity global credit where yields are attractive. We still believe that the path to 2% inflation in the US is relatively unclear. If anything, our conviction on this point has increased because easier financial conditions may ultimately pave the way for the return of sticky inflation.

The peaking of interest rates and potentially the US dollar could be a boon for broader markets—particularly those more sensitive to liquidity, countries with more room to ease rates and areas where positive fundamental changes have been overlooked. China’s economy is undergoing a major transition into one that promotes advanced manufacturing, technology, self-sufficiency and higher-end overseas growth. These are areas of our focus.

Home bias might be an understandable trait for investors, but in the current environment a lack of meaningful international diversification—particularly towards the Asia-Pacific region—risks leaving substantial amounts of investment returns on the table.

We expect macro and corporate credit fundamentals across Asia ex-China to stay resilient due to fiscal buffers although slower economic growth seems to loom over the horizon.

Navigating Japan Equities: Monthly Insights from Tokyo (January 2024)

This month we discuss why the equity market is relatively unaffected by the political scandal shaking Japan’s ruling party; we also assess how 2024 could become an inflection point in the country’s “savings to investments” drive.

Although we believe that the prospects for the economy remain mostly unchanged, the outlook is softer at the margins, perhaps reflecting the tightening of financial conditions seen during the recent months. Over the past month, however, financial conditions have eased considerably on the assumption of impending rate cuts.

New Zealand markets outlook 2024: the only certainty is more uncertainty

Given the volume of quality defensive companies with relatively high dividend yields, higher for longer interest rates are a significant headwind for New Zealand’s equity markets. Alongside these, the country’s globally-focused export companies will be looking for the global growth story to play out positively, but for the meantime will at least be enjoying a relatively weak New Zealand dollar.

Corporate governance reform points to opportunities ahead in Japan equities

Japan may not be known for quick, sweeping reforms. However, developments in the country’s corporate governance over the last 10 years suggest that once changes are set in motion, they can have a deep and lasting impact, raising the value of its companies and creating investment opportunities along the way.

Global Investment Committee’s outlook

We expect poor 1Q24 returns for MSCI World after the 4Q23 surge, but a more positive trend for the rest of 2024. Regionally, we much prefer Japan in the year ahead. Our view on global bonds for USD-based investors is that they are preferred during much of the 1H, but only marginally attractive in the 2H.

We expect sentiment toward Asia’s bond markets to turn increasingly positive in 2024. We also expect macro and corporate credit fundamentals across Asia ex-China to stay resilient on the back of fiscal buffers, although slower economic growth appears to loom over the horizon.

Despite short-term negatives, we believe that China continues to offer ample long-term growth opportunities as the country pivots towards advanced manufacturing and technology. Elsewhere, some of the best growth stories globally could be found in India and Indonesia, while Taiwan and South Korea are expected to continue benefitting from a modest upcycle as the semiconductor industry recovers.

Navigating Japan Equities: Monthly Insights from Tokyo (December 2023)

We discuss how a bullish year for Japan equities has brought what was previously out of sight into view and analyse focal points for the market as we head into 2024; we also assess how focusing on efficiency and growth could be the way forward for Japan given its projected drop in the GDP rankings.

Global multi-asset outlook 2024

Our investment themes for 2024 focus on key features of a world in transition. They include higher-for-longer rates, production shortages in natural resources and the search for new sources of productivity. Transitions are never easy, and features of the old world accustomed to low rates may not make it. We believe that some of these old-world features could pose systemic risks as “creative destruction” does not always run smoothly.

New Zealand Fixed Income Monthly – November 2023

Amid significantly negative returns in both the equity and fixed income markets at the end of last year, it was thought that 2023 would be the “year of the bond”. As we near the end of 2023, however, the bond market is still yet to live up to those expectations. Even so, our view is that the upswing for bonds has been deferred but not cancelled. Although cash has been king for the last two to three years, we believe bonds are now poised to take the crown.

New Zealand Equity Monthly – November 2023

November was a stronger month for equities given that central banks around the world began suggesting that interest rates have peaked. While we do not expect to see any rate cuts in the near term, investors appear to believe that the worst is over in terms of rate increases. That view has been beneficial for New Zealand’s equity market, which bounced back by about 4% in November.

Global equity outlook 2024

We are heading into a changing world, where the more recent past can no longer be relied on to guide our path forward. But we are not blindfolded. There are tools we can use to provide a greater degree of certainty. Our Future Quality approach is designed to help us identify franchises that are set to endure.

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For more information on Nikko Asset Management's UCITS or tailored investment mandates, please contact:

Email: EMEAenquiries@nikkoam.com
Tel: +44 (0) 20 7796 9866

Nikko AM works with the UK-based international organisation Carbon Footprint Ltd. to offset carbon emissions through offset programmes, and has been certified as carbon neutral since 2018.