Insights

We downgraded our defensive position marginally, while we maintained an overweight to growth assets.

With the US “exceptionalism” narrative fading, we see value in global diversification. We observe potential turning points in Europe and China equities that may serve as opportunities to diversify global portfolios. Volatile market conditions may be the new normal, but opportunities may emerge due to greater differentiation among firms and economies.

We continue to believe that Asia’s local government bonds are positioned to perform well, supported by accommodative central banks amid an environment of benign inflation and moderating growth.

While US equities stumbled in February, Asian ex Japan equities gained modestly, helped by continued positive momentum in Chinese tech stocks. China's tech has been the comeback story so far in 2025 after DeepSeek injected some liveliness into the market.

Vietnam is demonstrating a commitment to improving governance, expanding infrastructure and cultivating a more competitive business environment. These efforts position Vietnam to harness its demographic advantages and capitalise on emerging geopolitical opportunities.

For 30 years, policy factors like falling corporate tax and interest rates were seen to have generated a bulk of corporate profits, reducing stock-selection opportunities. There are indications that this policy-driven earnings era is coming to an end, heralding darker days for the average firm. However, firms skilled at raising profitability in core business areas could benefit, thus creating new opportunities for skilled stock pickers.

We believe that the Official Cash Rate’s projected path to the 3% level, which we consider likely to be the lowest point of the Reserve Bank of New Zealand’s current easing cycle, may be more noteworthy than the interest rate cut in February.

February was a challenging month for New Zealand’s stock market following a weak corporate earnings season. Looking ahead, however, we remain confident about the market in 2025 and after. A key reason for this is the interest rate cutting cycle by the Reserve Bank of New Zealand that is currently underway.

We assess the factors behind the recent surge in Japan's long-term yields and its implications for equities; we also analyse the robustness of corporate earnings amid the structural economic changes taking place.

In March 2024, after the Nikkei Index reached an all-time high, we offered five structural reasons why Japan's economic resurgence was more than just a flash in the pan. Almost a year later, those five reasons remain just as relevant for investors considering an allocation to Japan.

Our focus on franchise and management quality allows us to look forward with optimism, whilst balance sheet quality and valuation discipline provide comfort for when the fireworks start for all the wrong reasons.

The focus in the media and amongst most analysts has centred around tariffs and a possible fiscal tightening in the USA – although we would argue that on a cash basis the latter is already happening quite aggressively. In some cases, it seems that even where the government has notionally incurred expenses, it does not seem to have distributed funds to its suppliers.

For January, we reduced our overweight position in growth while maintaining our overweight position in defensives. With respect to growth assets, Trump's second presidency ushers in a new era of US exceptionalism which has implications on the rest of the global markets.

In January, the Bank of Japan raised short-term interest rates to 0.5%, the highest level seen in 17 years, as it continued with its slow but steady withdrawal of accommodation. As the Japanese economy shows ongoing signals of recovery from decades of stagnation, we assess the impact the return of interest rates could have on the country’s households, firms and government.

The Indian healthcare sector is projected to become one of the top global markets by 2030, driven by demographic changes, rising incomes, and expanding insurance coverage, presenting long-term investment opportunities.

We believe the introduction of DeepSeek may cause a recalibration of capital expenditures. Its introduction has initiated a shift towards a more cost efficient, scalable, and accessible AI landscape.

We see Asian local government bonds being supported by accommodative central banks amid an environment of benign inflation and moderating growth. Within the region, we expect investor appetite for higher carry bonds such as those of Malaysia, Indonesia and the Philippines to stay firm relative to their regional peers.

The speed at which AI applications are becoming part and parcel of daily life is breathtaking, with DeepSeek's apparent breakthrough merely accelerating an inevitable, fundamental change in the field. We firmly believe these breakthroughs are the key components needed for sustainable, long-term returns.

The New Zealand equity market paused for breath and dipped in January after posting significant gains towards the end of 2024. Some of the market’s decline reflected a dent in enthusiasm for consumer-facing and cyclical stocks. Global market jitters also appeared to have an impact with disruption risk coming to the fore.

Although the arrival of a new year has brought some optimism after a tough 2024, economic activity remains subdued in New Zealand. The Reserve Bank of New Zealand may further cut interest rates in 2025 with global uncertainties impacting the country's economy.

This month we discuss signs of improvement in the Bank of Japan (BOJ)'s market communication following its recent rate hike; we also focus on Japan's economic resilience amid a flurry of trade-related headlines impacting the markets.

In the 2024 October-December quarter, risk assets largely moved in line with expectations surrounding the US presidential election. We maintained an overweight position on growth assets over the quarter amid indications of resilient economic conditions. Our view of defensives improved with higher yields having made this group of asset classes more attractive.

The Federal Reserve is seemingly following in the footsteps of the Bank of Japan and adopting a strategy of monetary policy gradualism. This measured approach is aimed at balancing rate cuts with inflation expectations and stabilising the economy without triggering price volatility.

We retained our positive view on growth on resilient economic data and dovish monetary policies globally as inflation is now closer to central bank targets worldwide. Our view of defensives improved as higher yields now make the asset class marginally more attractive.

The BOJ increased overnight rates by 25 basis points, raising the Mutan call rate to its highest since 2008. The decision reflects the BOJ's belief that the economy is performing in line with its view, with positive real wage growth and an upgraded near-term inflation outlook. Uncertainty over US tariffs persists, but Japan's need for AI-related technologies may play an indirect role in reducing trade-related risks.