Insights

The GIC expects the global economy to continue struggling in a form of “stagflation-lite” and sees a relatively flat performance for global equities for the next three to six months (although quite positive on Pacific equities), with moderate weakness for global bonds.

The economic costs of the current conflict in Ukraine may pale into insignificance in comparison to the human suffering, but they are not irrelevant to markets. The bottom line is of course that wars make society poorer, as does conflict in general, natural disasters, or catastrophic errors.

The Russian invasion of Ukraine has created significant uncertainty for investors. Prior to the war’s outbreak, central bankers were already facing a challenging inflationary environment, and these new commodity-driven price pressures are set to complicate matters even further.

Following the Russian invasion of Ukraine, there has been considerable media coverage and interest about the implications this has on New Zealand investments. This invasion has seen devasting humanitarian effects. Our thoughts are with the people of Ukraine and those who have had family and friends affected by this crisis.

We are generally neutral to slightly cautious in our view of countries whose bonds are relatively more sensitive to UST movements. Within Asia currencies, we prefer the Chinese renminbi and Malaysian ringgit over the Indian rupee and the Philippine peso.

We think the New Zealand bond market looks very attractive relative to the rest of the world given how high our interest rates are. At the same time, we certainty aren’t immune to developments in the rest of the world, particularly the US, where the Federal Reserve is poised to begin raising rates.

The New Zealand market recovered well from the global plunge in equities seen in response to Russia’s invasion of Ukraine on 24 February. The current events in Europe have had very little immediate impact on New Zealand, particularly from a corporate earnings perspective.

Asian stocks suffered losses in February as escalating Russia-Ukraine tensions culminated in an invasion of Ukraine by Russia. But despite the war in Eastern Europe, in our view Asian economies are more than strong enough to withstand commodity price hikes even at their current elevated levels.

This month we discuss how higher long-term yields could impact Japanese stocks; we also focus on how robust exports could play a role in boosting the country’s long stagnant wage growth.

The Western World today faces a public sector burden that bears a troubling resemblance to the immediate Post-war period in the late 1940s and 1950s; a private sector debt burden that bears comparison to the late 1990s / early 2000s; and an inflation problem that is beginning to look like the 1970s. Now, we would add to this list a “Cold War” situation that looks like the early 1980s (i.e. Afghanistan and other Proxy Wars between superpowers).

The just released 4Q CY21 data on aggregate corporate profits in Japan was very positive, with the overall corporate recurring pre-tax profit margin hitting a record high on a four quarter average.

In order to gain a range of perspectives on the Russia-Ukraine conflict, Nikko Asset Management has gathered the views of various experts and investment teams, representing many of our major asset classes and geographical regions.

We analyse the course the Bank of Japan could take as other major central banks move towards policy change; we also take a deeper look into Japan’s strong exports, which are expected to keep buoying the economy in 2022.

Policy actions by monetary authorities diverged across the region; we remain cautious on bonds of low yielding countries and regional currencies.

Have you ever stopped to imagine what would happen if the world’s central banks spent just over a decade pouring USD 25 trillion of liquidity into the economy with more than 60% of that liquidity created in the last two years? In this article, we’ll try to assess what has happened and think about how investors should navigate the next phase of the greatest financial experiment of all time.

The outlook is currently challenging. Tightening is coming, but it is not here yet and in the meantime current policy remains quite accommodative. There is no doubt that extremely easy policy boosted equity prices, which were reinforced by strong earnings. Still, we believe organic growth can continue.

Asian stocks had a tough start to 2022 amid concerns that persistent inflation could cause any tightening by the US Federal Reserve (Fed) to be more aggressive than expected. For the month, the MSCI AC Asia ex Japan Index fell by 3.10% in US dollar (USD) terms.

Increasing expectations of a more aggressive Fed tightening cycle have led to a sell-off in US Treasuries. We share our thoughts on what this means for investors in 2022 and discuss our outlook for Asian bond markets.

We see the volatility in the New Zealand markets as an opportunity to focus on new companies for which we have a high degree of confidence in their earnings.

Inflation is creating challenges for the New Zealand bond market and economy. In line with bond markets around the world, New Zealand’s market has had a difficult start to 2022. Bond yields and interest rates in general have been climbing as central banks hike rates to tackle soaring inflation.

We highlight the increasing importance of engagement in Japan, explain how it could be the key to unlocking the long-underperforming Japanese market’s potential, and assess how it can lead to the generation of alpha.

Going back to India for a month after two long years of not being able to visit my family, I was pleasantly surprised by the new normal. While there has been much adversity, COVID-19 has also sparked positive change, especially on technology adoption.

It would not be surprising if the major swings in the markets and macroeconomic conditions, including historic central bank shifts, have made most investors somewhat seasick. Recently on a day-to-day basis, markets seem to react quite irrationally, but the overall backdrop is fairly clear: the markets are getting accustomed to one of the most rapid and major shifts in Federal Reserve policy ever in its history.

The Federal Reserve may have been caught by surprise by the persistence of inflation in the USA over recent months but we suspect that many investors in the Emerging Markets are about to experience a similarly unpleasant surprise of their own.

An ability to look forward to better times and remain optimistic is invaluable. These attributes are no less helpful when investing in equities. Whilst you can get an unpleasant surprise from misjudging the direction of the tide while enjoying your picnic, the consequences for misjudging the direction of the liquidity waves look more pronounced than ever as we enter 2022.