Insights

Investment Insights by our experts and thought leaders

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.

Green Bonds Go Mainstream

2014 has become a landmark year for green bonds, having become one of the few sustainable investment instruments to reach a suitable scale and poised to enter the mainstream for global institutional investors.

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.

Changing of the guards in Asia

Is political democracy good for economic growth and ultimately, stock markets in Asia? Indisputably, sound political systems are crucial for economic development and progress.

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.

Australian Fixed Income: Credit Commentary - October 2014

Physical credit spreads have remained at reasonably tight levels due to the ongoing search for yield — although global uncertainty in the Middle East, fears about Ebola, and re-emerging concerns about Europe have generated negative sentiment.

Australian Fixed Income: Market Commentary - October 2014

The Australian economy seems to be struggling to achieve traction as the mining boom transitions from a capital expenditure phase to a shipment phase.

No sovereign bond bubble but perhaps a new conundrum

Prior to the global financial crisis, nearly $17 trillion of developed nation bonds were rated AAA. Now there are less than $2 trillion. Not only has supply been restricted, but also diversity, with the number of AAA rated countries falling from 15 to 9.

Australian Equity: Market Commentary - September 2014

A confluence of factors worked against the Australian market during the month. Regulatory concerns in the banking sector, lower commodity prices and a weaker Australian dollar were the key drivers of the market’s underperformance.

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.

Australian Fixed Income: Credit Commentary - September 2014

In the Australian credit market, the relative lack of supply compared with demand continues to cause spreads to tighten in the physical market offsetting the risks of an unstable geopolitical environment.

Australian Fixed Income: Market Commentary - September 2014

Reasons for the recent weakness in the AUD include a fall in the iron ore price, the rally in the US dollar, weaker Chinese data, and indications that the Reserve Bank of Australia is considering macroprudential controls.

Japan’s “Show Me the Money” Corporate Governance

Improving the number of independent directors and other governance issues are very important in the intermediate term for Japan, but it is crucial for investors to understand that much of the profitability message has already been understood by Japanese corporate for nearly a decade.

Super-Abenomics Key Performance Indicators - September 2014

Japan’s pipeline inflation, which we measure using the recently renamed Producer Price Index’s Finished Consumer Goods for Domestic Demand sub-component continued to be quite depressed in August.

Japan: CY14 GDP Should Exceed Consensus

Japan’s 2Q GDP growth, at -7.1% QoQ SAAR, was far below June’s consensus of -3.1% (and our -2.5% estimate) and we need to reduce our CY14 forecast, but not by much and we remain more optimistic than consensus.

Equity Markets - September 2014

Although not a Goldilocks scenario, our forecasted macro-backdrop is quite positive for global equities.

Bond and Currency Targets - September 2014

G-3 bond yields rose less than we predicted, mostly due to continued ECB aggressiveness, worries about the Chinese economy and the decline in oil prices.

Central Bank Watch - September 2014

Sentiment about Fed policy remains very volatile, but Yellen has remained remarkably stable in her outlook and bond prices have remained under control during the transition away from ultra-accommodative levels.

G-3 Economies Should Be Fine

Nikko AM’s Global Investment Committee met on September 26th and updated our house view on the global economic backdrop, financial markets and investment strategy advice. In sum, there certainly are some worrisome issues, as always, but we find none of them convincing enough to halt the upward momentum in equity prices.

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Nikko AM has been certified as carbon neutral for the first time, after entering into a carbon offset programme with the UK-based international organisation Carbon Footprint Ltd.

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We are pleased to be bringing you Nikko AM's 2019 Sustainability Report. In it, you will read about our responsibility as an investment manager and fiduciary that contributes to a sustainable society, considering ESG as a part of long-term investment strategies.

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