Insights

Investment Insights by our experts and thought leaders

Investing in a multipolar world

Between still high levels of inflation, fast-tightening central banks, a growing energy crisis in Europe and slow growth in China, it is easy to imagine a bleak growth outlook. But these difficult dynamics also harbour opportunities often masked in exaggerated mispricing based on fear and confusion.

Navigating Japan Equities: Monthly Insights from Tokyo (October 2022)

This month we analyse what immediate impact the full reopening of Japan could have on the economy and markets; we also review the factors that may make Prime Minister Kishida’s “asset-income doubling plan” more effective in the long term.

A big comeback: Rising fortunes of Asia’s small caps

After spending almost a decade in the shadows of their larger counterparts, Asia’s smaller companies are being viewed in a new light. Factors that had weighed on these businesses are now turning into tailwinds, and we have identified seven key developments which should provide momentum for the asset class.

A Round Trip to the Plaza Hotel, and the End of Orthodoxy

As the famous 1980s’ bumper sticker (almost) said, “shocks happen”. The global economy / ecosystem is an inherently dynamic entity, constantly changing its shape and composition. Some of these changes will of course favour some economies while disadvantaging others.

Our scenario is fairly ugly for the 4Q, but has a strong silver lining thereafter. We are not optimistic about the global economy and investor returns reverting to normal for an extended period, but there should be clear intermediate term relief and pockets of strong outperformance due to idiosyncratic advantages.

Opinion: Our ageing population and immigration settings are bad for all of us

Population growth, demographic changes and immigration policy are all important factors that followers of investment markets play close attention to. These are drivers that have a profound impact on a country's future.

The world is fast entering the adjustment phase as deglobalisation is accelerating, requiring new solutions and investment to clear new imbalances from energy supply to labour and eventually normalise inflation.

ESG through an Asian equity lens

In recent years, the increased focus on ESG has validated our beliefs. Yet, the complex and fast-changing economies and societies that make up Asia continue to be a challenge confronting investors looking to apply ESG analysis across Asian asset classes. This is a good thing, as investors who can do this successfully will likely add even more value to alpha generation.

On the Ground in Asia-Monthly Insights: Asian Fixed Income-August 2022

Inflationary pressures continued to remain elevated in July, as the headline CPI numbers in South Korea, Singapore, Indonesia and the Philippines increased, while those of Thailand and India moderated. During the month, the central banks of Thailand, Indonesia, the Philippines, South Korea and India raised their key policy rates.

The regional index of the MSCI AC Asia ex Japan in August was flat at 0.0% in US dollar terms, recovering after falling into negative territory earlier. The North Asian region was weighed down by foreign currency effects, trailing behind its ASEAN counterpart. India benefitted from its rate hike and lower oil prices.

New Zealand Equity Monthly – August 2022

In an encouraging sign for New Zealand equities, the benchmark NZX 50 Index ended August approximately 10% higher compared to the lows it saw in June, when it dropped below the 11,000 level for the first time in two years. However, the market still faces challenges given that at the end of August the index was also down about 10% compared to the start of 2022.

New Zealand Fixed Income Monthly – August 2022

New Zealand bonds went through a tough period in August. The rough patch reflects continuing uncertainty, with the bond market undecided about whether it should focus on inflation itself or pay more specific attention to the measures that central banks are adopting to deal with it.

Navigating Japan Equities: Monthly Insights from Tokyo (September 2022)

This month we discuss the factors behind Japan’s high level of share buybacks; we also look at the economic implications of COVID in the wake of a particularly large infection wave.

Japan Value Insights: Creating economic wealth by utilising forest resources

Utilising and regenerating Japan’s ample forest resources by promoting a “wood cycle” could contribute to the creation of economic wealth and a net-zero carbon future.

China - and New Zealand

Almost forty years ago, China’s then paramount leader, Deng Xiaoping, decided that his country needed a “Great Leap Forward” in order to catch up with its economic rivals and secure its then fading place within the global system.

Japan’s “show me the money” corporate governance: 2Q record high

The just-released 2Q CY22 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.

Global Equity Quarterly (Q2 2022)

Our belief is that we have moved into a new regime where inflation will be structurally higher despite the anchors of high debt burdens, ageing societies and ongoing technological disruption.

We are taking a more constructive view in duration overall, as we believe that the markets have largely priced in hawkish Fed expectations. Among the low-yielding countries, we prefer Singapore and Hong Kong, while we like Malaysia and India among the mid- to high-yielding countries. On currencies, we maintain our preference for the Singapore dollar.

It may be easy to become gloomy after the drawdown of the last few months. But we believe that there are plenty of reasons to be optimistic about the prospects for compounding your future capital from today’s levels, if you take into account the following three steps: 1) recognise that that we have shifted to a different road type, and it is rougher and more variable; 2) realise that this new road may be best travelled with different vehicles; and 3) improve your probabilities by sticking to a few enduring principles.

The shift in market narratives continues to gather pace, matching the increase in volatility of the economic cycle seen since the beginning of the pandemic. Central banks are generally aiming to smooth the economic cycle, but this time they may be adding to the volatility of the cycle instead.

Higher commodity prices impacted returns in Asia, while a slip in prices of crude oil and metals benefitted many Asian nations. We expect the future trajectory of inflation to dictate the path of interest rates, which in turn is seen determining economic growth globally.

Asia corporate high yield: Market review and outlook

Asia high yield credit had a tough start to 2022, succumbing to heavy selling pressure . Apart from geopolitical tensions, tighter financial conditions and rising recession risk in major developed economies, sentiment toward Asia HY has been heavily weighed down by sustained stress in China’s property sector. Going forward, we believe the pace of correction will moderate.

Navigating Japan Equities: Monthly Insights from Tokyo (August 2022)

We take a look at the short and long term prospects of Abenomics without Abe, and we also discuss the recent trend of an increasing number of Japanese companies passing on higher costs to consumers and whether this phenomenon can continue.

New Zealand Equity Monthly – July 2022

This month we focus on two ESG-linked themes that generate a significant amount of investor interest: carbon neutrality and modern slavery.

New Zealand Fixed Income Monthly – July 2022

As we have already mentioned several times, it has been a very tough year for New Zealand bonds. Although there is perhaps light at the end of the tunnel after the market hit a very low point; in our view, good quality assets could outperform cash over the medium term.