Insights

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.

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.

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.

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.

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.

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.

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.

Major “events” in markets have been caused by wrong assumptions over mathematical relationships. The Long Term Capital Management Debacle (LTCMD) in 1998 was primarily the result of the incorrect assumption of perfect markets by a cluster of Nobel Laureates. The naïve and wrong assumptions over correlations proved to be the spectacular undoing of the mortgage markets in 2007-8.