Insights

The just-released 4Q CY22 data on aggregate corporate profits in Japan was somewhat mixed, as the overall corporate recurring pre-tax profit margin fell from its record high on a four quarter average. The non-financial service sector ticked up, but the manufacturing sector fell from its record high.

There is a growing view that the Pandemic, and the policy response to the Pandemic, have ended the period of Secular Stagnation within the Global Economy and potentially replaced it with “fiscally-led faster growth” and higher inflation. It is easy to see the logic behind this view; the author was an ardent inflationista only 18 months ago. The only flaw in the argument would appear to be the behaviour of the bond markets, which this year look superficially at least to have been embracing the concept of renewed economic stagnation.

Current equity market conditions dictate that you choose your investment attire particularly carefully. In our view, buying profitless technology companies is like going up a Scottish mountain wearing flip-flops. You might get away with it, but the odds are not in your favour. Instead, we prefer the protection afforded by profits (and cash) generated today—not at some unspecified point in the future.

Currently, there is a wide variety of predictions for the BOJ’s actions, with some expecting imminent hawkish decisions based upon some of Governor-nominee Kazuo Ueda’s “anti-distortion” comments, but changes are more likely to be gradual and tentative assuming the global economy continues improving.

We maintain the view that global inflationary pressures may moderate further. We prefer Singapore, South Korea and Indonesia bonds. As for currencies, we favour the renminbi, the Singapore dollar and the Thai baht.

Growth prospects look to be improving—a sharp shift from late 2022 when the markets had strong conviction that a first half slowdown was to be followed by a better second half.

Asian equities made a strong start to 2023, with the MSCI AC Asia ex Japan Index returning 8.2% in US dollar (USD) terms in January, supported by a rebound in investor sentiment towards China.

Contract development and manufacturing organisations (CDMOs) could play an important role in addressing health-related needs as society seeks rapid solutions to issues such as an increase in refractory diseases.

This month we assess the trends in wages and salaries with significant change potentially in progress; we also discuss how changes at the BOJ may affect the market.

A regular debate between the older and younger members of the Hunt-household revolves around whether old suspenseful Black-and-White horrors are actually more scary than vivid technicolour gore modern films. We suspect that for the Federal Reserve, what you can’t see in black and white may be the scarier concept…