A flying visit into China post the 19th Party Congress seemed like a good idea. I got the sense that post the conference, visibility and direction over the next five years was reasonably clear. But it is more difficult to hold a similar view for 2018.
The Japanese equity market rose in December, with the TOPIX (w/dividends) climbing 1.57% on-month and the Nikkei 225 (w/dividends) rising 0.32%.
Our Senior Portfolio Manager for Emerging Markets in London forecasts that in 2018, this asset class could well match 2017’s achievement.
For 2018 and beyond, we see a story of central bank policy normalization and foresee the global economy growing in a similar fashion to how it did in 2017: low growth coupled with comparatively low inflation data.
We see the key investment themes to drive performance in Global Credit in 2018 to be similar to last year. We have developed our investment themes: Long US High Yield, Long Chinese Tier1 SOEs, Long European Hybrids, Long European Financials, Long Rising Stars.
We expect the economic backdrop for Asian credits to remain constructive in 2018, but remain cognizant of several risks including rising interest rates, robust supply, unexpected weakness in China, geopolitical developments and cross-asset volatility.
The global recovery is expected to continue, albeit at a more moderate pace. Meanwhile, we foresee policy normalisation and an acceleration of inflation in Asia.
China has not yet been fully incorporated into indices, creating a mismatch and a unique challenge to investors in navigating this new world order.
Despite geopolitical risks and central banks that will be less dovish than the market expects, the Global Investment Committee forecasts that the G-3 economies will grow faster than consensus and that global equity markets will remain very bullish in the intermediate term.
Low global inflation and, until recently, a strong Kiwi dollar have kept New Zealand’s inflation rate low over many years, however things may be about to change.
The MSCI AC Asia ex Japan (AxJ) Index returned 38.0% in USD terms year-to-date, on the back of a broad-based economic recovery. The Index outperformed the MSCI World Index, which rose 20.8% in USD terms in the same period.
US Treasury (UST) yields declined during the month. The nomination of Jerome Powell as the next US Federal Reserve (Fed) chairman overshadowed stronger US economic data, but was subsequently offset by increased geopolitical risks in the Middle East and a setback to US tax reform.
The MSCI AC Asia ex Japan (AxJ) Index returned 0.6% in USD terms in November. The index approached ten-year highs during the month on expectations of continuity in US Federal Reserve policy and robust economic data, but gains were pared at month-end by a sell-off in technology heavyweights.
The imminent party election will be crucial in determining this major Emerging Market’s future.
Having recently returned from the US, Stefan Hansen, Senior Research Analyst at Nikko AM Australia, shares his thoughts on US shale oil production and the potential impact on the oil price.
The implications of a surprising decline in non-manufacturers’ profit margin.
From an economic perspective Canada and Australia share some common features, but we would caution that the performance of the two economies is substantially different than generalisations would suggest.
Even as the situation in Germany to form a new government is difficult, financial markets have reacted very mildly to the uncertainties.
We think it is unlikely that May will be replaced within her own party. This is because there is a lack of an heir-apparent, and the Conservative Party would be extremely reluctant to even slightly increase the risk of another election.
The MSCI AC Asia ex Japan (AxJ) Index returned 4.7% in USD terms in October, outperforming the MSCI World Index which returned 1.9%.
US Treasuries (USTs) fell in October, as prospects of higher growth and inflation increased after the US Senate approved the Republican-backed budget for 2018.
The Japanese equity market rose in October, with the TOPIX (w/dividends) climbing 5.45% and the Nikkei 225 (w/dividends) rising 8.16%.
“Hopefully for the markets, the Fed transition will be smooth, but it might not be and hawkish Presidents may have much greater influence.”
John Vail, Chief Global Strategist for Nikko Asset Management, contributes a regular column to Forbes.com