Insights

Investment Insights by our experts and thought leaders

Bond market sell-off may look like 2003, but it shouldn't be as bad for US Treasuries

Although the recent bond market sell-off may remind the market of 2003, we don’t believe US bonds will be as badly affected. By comparing the worst US bond sell-offs since 2003, we estimate that the 10-year US Treasury yield could hit a high of 2.8-3.2% by October.

Will US rate hikes weigh on risk assets?

Real yields and inflation expectations currently suggest exceptionally low growth and low inflation far out into the future.

Japan's “Show Me the Money” Corporate Governance - June 2015

We expect that profit margins will expand further in coming quarters, driven by a large corporate tax cut and continued industry rationalizations that further prove that Japan's structural profitability trend continues upward.

Does the price action of bunds signal an end to ultra low rates?

We do not expect the recent steepening of the bund yield curve to be the beginning of a sustained new trend. Moreover, Eurozone and German economic data, albeit improving, are not sufficient to support the higher bund yields on a sustained basis.

A Global Savings Glut? Or Just Deflationary Forces?

One of the reasons that we tend to eschew “black box” forecasting models of any economy is that we suspect that there are simply too many variables and discontinuities for even mathematicians with the skill of the late John Nash to ever really encompass effectively. In this context, One of the least understood or modelling-friendly “variables” within a macroeconomic system is the household savings rate...

Did Asia's Central Banks Engage in the Global Currency War?

Since the Fed starting hinting at the normalization of interest rates a year ago, Asian central banks' foreign reserve accumulations - except for India and Hong Kong - have either incurred substantial losses or remained flat.

Recent yield rises don’t necessarily signal the end of bond market rally

With many markets having rallied from major support levels when they were in highly oversold positions, we believe that bond markets should stabilise or rally from current levels.

Japanese Overseas Equity Exposure Rising

We expect that Japanese pension funds will continue to shift their investments into risky assets in 2015.

The Problem With Zero Interest Rates

Over the last 20 or so years, global interest rates and bond yields have collapsed to levels that few would have thought possible even in the late 1980s. The process started in Japan in the mid-1990s following the bursting of that country’s credit-driven Bubble Economy, but from 2003 – and certainly from 2008 onwards – the UK, US and much of the “dollar bloc” have followed suit...

Low oil prices: Saudi Arabia can afford to bide its time

Oil-producing countries have seen the largest drop in their foreign exchange (FX) holdings over the last year. In our view, Saudi Arabia can afford to handle oil prices at their current level for some time but ...

China's LGFV debt swap – Shining light on the Shadows

The importance of President Xi Jinping's strong leadership cannot be stressed enough. Under him China is undergoing dramatic changes. While the most thorough cleansing of state corruption is ongoing, elements of China's grand strategy are becoming more evident both domestically and on the global stage.

Market isn't overheating even after Nikkei touched 20,000

The market isn't overheating even though the Nikkei stock average touched the 20,000 level, nor do we believe that overseas markets are overheating right now.

Our View on the Crucial Chinese Property Market

Given the significant proportion of real estate investment as a percentage of GDP, as well as the proportion of local government revenue generated from land sales, the property market remains a crucial driver of the Chinese economy.

The New Governance Code – What impact will it have on Japanese companies?

Due to the developments described in this article, there is ample room for growth at Japanese firms and much opportunity for investment success.

Triffin Revisited: Why the Unwinding of the Dilemma Matters

There is a well-known dilemma that exists for the country that “owns” or operates the global reserve currency. Since global trade and many capital account transactions are settled in the reserve currency, it is incumbent on the economy that provides the reserve currency to ensure that it is a net exporter of its currency so as to accommodate global growth and hence the growing need for reserves and international settlement funds ...

Japan's Successful “Show Me the Money” Corporate Governance

John Vail updates his long-standing theme: Japan's Successful “Show Me the Money” Corporate Governance.

The ECB's Gamble

World trade prices are currently falling at probably their fastest pace since the dark days of the Global Financial Crisis and, in doing so, they are imparting a deflationary bias to the world economy. We find that even in some of the world's strongest economies ...

European Property: Does it Signal Global Deflation?

Through 2014, one of the largest asset classes in the world was virtually unnoticed as an indicator that Europe is not pushing the global economy into widespread deflation.

Will European QE deliver on Earnings expectations?

There are several credible reasons to expect that QE will boost corporate earnings in Europe, though by not as much as in the US. However the risk of disappointment relative to inflated expectations remains high.

Will deflation or inflation be the global focus for 2015?

In 2015, markets will be looking for any pick up in European and Japanese inflation as a result of their QE programmes. With growth picking up, we may start to see signs of a rise in US inflation.