Insights

Investment Insights by our experts and thought leaders

New Zealand Fixed Income Monthly (May 2024)

New Zealand's fixed income market has struggled so far in 2024 and inflation has remained high. However, there is growing confidence that the Reserve Bank of New Zealand will lower the Official Cash Rate in the next six to 18 months due to a slowing economy, with the expectation that inflation will retreat to the central bank's target range by the end of 2024.

New Zealand Equity Monthly (May 2024)

New Zealand’s equity market is currently facing challenging times. However, a sense that the country’s interest rates may have peaked are some of the indications that the market’s outlook may brighten.

India’s election and implications for equities

In the 2024 Indian parliamentary elections, Prime Minister Narendra Modi's BJP won fewer seats than expected. However, with support from pre-alliance partners, Prime Minister Modi will lead a coalition government for a third term, indicating a public desire for policy continuity and reform. While economic fundamentals are strong, the election results also reflect rural distress and the need for job creation, suggesting the government may focus on expanding the manufacturing sector, infrastructure development and digitalisation.

Navigating Japan Equities: Monthly Insights From Tokyo (June 2024)

This month we look beyond Japan’s impressive dividends and share buybacks from the perspective of corporate governance reform; we also explain how the “quantity effect” associated with exports may reduce the relevance of currency levels.

Healthcare: the sector where innovation is flourishing under the radar

The healthcare sector is benefiting from rapid innovation, fuelled by a significant jump in COVID-led funding. The breakthroughs achieved during the pandemic are only just being realised, and further innovation will be fuelled by artificial intelligence.

Seeing further: navigating AI change through a Future Quality lens

With AI transforming the technology landscape, how do investors wade through the noise to identify genuine investment opportunities? We use our Future Quality framework to find the high-quality companies that are already moving the AI dial.
As the market comes to grips with the US rate structure potentially remaining high, we expect to see increased market volatility and a potential return of the positive correlation between bond and equities that was evident in the market through 2022.

The yen: how weak is too weak?

The ongoing weakness in the yen has led to intense debate over whether Japan can cope with further challenges to its global purchasing power. Although it is a matter of concern, a weak currency isn't necessarily undermining Japan's economic recovery. That said, a prolonged downtrend for the yen warrants vigilance as it could destabilise the economic recovery by triggering inflation.

Seeing further: the increasing role of electrification in the energy transition

Energy consumption forms the backbone of modern lifestyles, and global economic growth is fundamentally dependant on energy supply growth. But as we consider the transition from fossil fuels to clean energy alternatives, the scale of the challenge is truly monumental.
In terms of duration exposure, we maintain a positive outlook for medium-term duration, finding the current yield levels attractive. We expect Asia credit to remain well-supported due to subdued net new supply as issuers continue to access cheaper onshore funding.
What a difference a month can make. Discussions have pivoted from interest rate cuts in the US to the possibility of an increase, while Chinese equities have rallied sharply on a combination of attractive value and hopes of effective policy implementation.

New Zealand Fixed Income Monthly (April 2024)

Despite the decline in one- and two-year inflation expectations, we feel that the longer term picture is likely to be dominated by broader secular forces, or prolonged trends not necessarily tied to cyclical factors, that structurally drive inflation.

Seeing further across global travel

International tourism is predicted to bounce back to pre-pandemic levels by 2024, driven by the return of Chinese tourists, a new travel cohort stemming from developing nations and artificial intelligence. Taking our Future Quality lens to the travel industry, we share some example companies well-positioned to benefit from the positive tailwinds in global travel.

New Zealand Equity Monthly (April 2024)

New Zealand is seeing its first set of climate-related disclosures. Under this regime which began in January 2023, large organisations release "climate statements" about the potential impact of their operations on the climate and vice versa, according to standards set by the country’s External Reporting Board.

Navigating Japan Equities: Monthly Insights From Tokyo (May 2024)

This month we analyse why the influence of capex and wages on spending behaviour are key to gauging whether an inflationary mindset is taking hold among households; amid an adjustment by Japanese stocks from record highs, we also look for growth narratives to sustain a long term uptrend.

Global Equity Quarterly Q1 2024

Dreams have a place in the world. However, in stock markets, cashflows often serve as gravity when share prices display dream-like behaviour. Fortunately, our Future Quality philosophy, coupled with our consistent process of reviewing the portfolio and ranking stocks, will help us separate dreams from reality. As a result, the portfolio is performing well, especially due to stock selection outside of AI and across all sectors.

Could ESG reporting rules spark an EU-US trade war?

The US presidential election in November continues to cast a long shadow, and as the race between the 45th (Donald Trump) and 46th (incumbent Joe Biden) presidents quickens, divisions have only widened. The investment world is no exception, and one particularly troubling battleground is the growing regulatory divide regarding ESG reporting.

BOJ stands pat on policy but paves way for future rate hikes

The Bank of Japan kept interest rates steady as expected while upping its CPI forecast, paving the way for future rate hikes. Any further hawkish stance by the BOJ may depend on the persistence of positive real wages and inflation's impact on consumer purchasing power.

Investing in Japan: an insider's perspective with Naomi Fink

Naomi Fink recently joined Nikko Asset Management as a Global Strategist based in Tokyo. We sat down with Naomi to discuss her personal relationship with Japan, and to hear her views on arguably the most talked-about investment region in the world at present.
Inflation uncertainty seems increasingly entrenched, which is less kind to developed market sovereign bonds. The US fiscal deficit is very large, and the Federal Reserve (Fed) is now in the challenging position of deciding when to cut rates. Energy remains a good hedge in this environment, and gold is increasingly being recognised as a store of value.
The Chinese economy and its equity market continue to be significant focal points in broader Asia. Additional support measures, combined with a recalibration of market expectations, have helped Chinese equities recover from the panic selling witnessed towards the end of 2023 and into January. As a result, fundamental strengths are being recognised in certain areas.
We maintain a positive outlook for Asian local government bonds, particularly those from India, Indonesia and the Philippines. In our view, the disinflation trends in these countries should provide their central banks with the flexibility to shift towards rate cuts later in the year.

Of volcanic activity and Asian fixed income markets

We highlight the importance of making decisions based on probabilities and the best expected outcomes, assessing relevant information and acting ahead in constantly changing market conditions.

Navigating Japan Equities: Monthly Insights From Tokyo (April 2024)

The Bank of Japan (BOJ) lifted interest rates for the first time in 17 years in March, making a historic departure from negative interest rates. We provide an overall evaluation of its decision, discuss how long accommodative monetary conditions could still last, analyse the yen’s potential policy impact and assess the BOJ’s options after halting ETF purchases.

Global Investment Committee’s outlook: stronger for longer

The Global Investment Committee sees robust corporate earnings, firm employment and expectations for rate cuts keeping markets more buoyant than anticipated by average consensus estimates.

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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.