Insights

Investment Insights by our experts and thought leaders

Future Quality Insights -November 2023-New regime, new learning

The last few quarters have been a good reminder that we are in a changing world. As a result, we need to focus always on investing in enduring franchises and we would suggest that our Future Quality approach is soundly placed in that regard. We also need to approach monetary policy with an open mind—sometime soon the central banks could change the game again. In surfing parlance, be ready with your trusted board and make the most of the conditions.

Credit spreads: not as tight as they seem

Recently many fixed income investors have experienced steep price declines in their bond portfolios. We have argued that it is not only duration that explains the interest risk of a portfolio, but that convexity needs to be accounted for as well. In this paper we point out that credit risk measures also have to be adjusted in an environment of declining bond prices.

The emergence of Sustainable Bonds as an asset class has been relatively rapid, and the spectrum of different classifications of investments can naturally be confusing for investors. Here we outline some of the key criteria for investors to look for when investing in Green, Social and Sustainability Bonds (GSS).

New Zealand Equity Monthly – October 2023

In one of the most significant changes surrounding New Zealand’s equity market in recent years, the general election held in October delivered a change of government. Overall business sentiment has been generally positive after the election result. The outcome has been favourable for the aged care sector and building-exposed names. On the other hand, it has thrown up some uncertainties over the future of New Zealand’s environmental policy.

New Zealand Fixed Income Monthly – October 2023

The general election held in October resulted in a change in government for New Zealand. Although it is difficult to gain a full picture at this stage, we can make some key observations on monetary policy: the Reserve Bank of New Zealand’s mandate could be pared back to ensure that its sole focus is on managing inflation.

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

We analyse the Bank of Japan’s decision to further tweak its yield curve control scheme amid the latest developments hinting at sustained wage growth; we also assess why an acute labour shortage could be a golden opportunity for Japan Inc. to change structurally.

While the risk-off environment stretched into another month, we are still finding plenty of positives in Asia. India’s macro remains favourable; Chinese equity markets are near the cheapest in 20 years; and the semiconductor industry is showing signs of a bottoming. With the US potentially having reached peak interest rates, this could be a welcome backdrop for Asian markets going forward.

Assessing the impact of Green Bonds

The Green Bond market has experienced tremendous growth since 2007, but despite its rapid success, there are still barriers to overcome. In particular, assessing the impact of Green Bonds continues to be a contentious topic.

Biodiversity is next for green bond expansion

Our economic system is based on a model of take, make and waste that consistently over-utilises and fails to replenish Earth’s valuable, but dwindling resources. The need to transform how we interact with nature creates a major opportunity for the green bond universe. So far, issuers have successfully embraced funding the transition toward carbon neutrality, but far fewer are looking at regenerative biodiversity projects or initiatives that seek to protect our ecosystems from loss.

China and India’s contrasting inflation front

We explore the opportunities and risks emanating from China’s near-zero inflation and India’s above-average consumer prices.

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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.