Insights

Investment Insights by our experts and thought leaders

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.

These Are Era-Defining Times

It has been a wild few weeks within debt markets – sharp sell-offs, even sharper rallies, and then a renewed sell off. Movements in equity markets have looked tame by comparison. Bond markets are certainly having to process a lot of conflicting information – inflation, deflation, politics and a mountain of potential issuance next year following what was an amazingly quiet year for debt issuance in 2023.

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.

Defying seemingly broad sentiment that a slowdown is coming, the US economy continues to chug along, and bond yields are continuing to wake up to the monetary reality that long-term rates need to be repriced accordingly. The adjustment has been aggressive and fast. Still, there is a natural limit to these types of moves.

Amid the current rise in oil prices, global central banks have become more vigilant against inflation, becoming increasingly wary of risks occasioned by a potentially premature end to their rate hiking cycles. Consequently, we deem it prudent to be more cautious on duration. We therefore have a largely neutral view on duration for most countries in the region.

Digging into ASEAN: unearthing the world’s next winner

We have long been enthusiastic about the ASEAN share markets, and the region continues to offer appealing prospects. While the fundamental drivers behind ASEAN’s growth and opportunities are not entirely new, in our view the trends remain irrepressible. We discuss two key pillars—industrialisation and consumerisation—that are expected to help cement ASEAN’s place in the minds of investors.

New Zealand Fixed Income Monthly – September 2023

Although the Reserve Bank of New Zealand stated in May that inflation was likely to return to its target range of 1-3% per annum if the Official Cash Rate remained at a restrictive level for some time, market expectations for interest rates have changed significantly since. At that time, rate hikes were expected to lead to rate cuts as inflation began to ease. New Zealand’s inflation has proved stickier than expected, however, as shown by the 6.0% annual rise seen in the consumers price index for the June 2023 quarter. This shows that interest rates continue to be held hostage by high inflation.

Japan primed for resurgence after a turnaround year

We believe that a long-term revival looms for Japan. Deflationary pressures are dissipating amid rising wages. The financial markets are headed for a resurgence, supported by robust stocks—which could benefit further from a re-allocation of the country’s vast household savings—and BOJ monetary policy headed towards normalisation after decades of unorthodox easing.

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

This month we discuss the timing of Japan’s savings to investments push as assets held by households hit a record high; we also look at the rise in the domestic long-term yield to a 10-year peak and assess its potential impact on the equity and credit markets.