Equity

We believe 2021 will be remembered as a year that marked the beginning of the end of the COVID-19 crisis as the world develops vaccines to counter the pandemic. In Japan, we expect a gradual recovery of its economy in 2021, as the pandemic’s impact lessens, and economic activity normalises.

Following the negative performance of 2020, we believe 2021 could see better returns and a recovery for Singapore equities. We believe equity returns will remain supported by the re-opening of the Singapore economy and expect an improved market performance in 2021. With the backdrop of fewer global trade conflicts, accelerating exports, accommodative policy, higher return on equity and low foreign ownership, we expect the outlook for 2021 earnings to improve and that should support better market returns.

Despite the pandemic, markets in China were resilient and we believe that they will continue to reach new highs in 2021. Structural factors that drove the Chinese markets in 2019 and 2020 remain intact and strong leadership enabled the Chinese markets to be among the best performing (if not the best performing) markets in the world. In addition to the structural factors that we have highlighted repeatedly over the past few years, such as import substitution trends, high value-added manufacturing and deep penetration and consumption of e-commerce, new structural factors have started to emerge that stoke our optimism towards the Chinese markets.

Asian countries have, by and large, handled the COVID-19 pandemic better than their western counterparts and are now emerging from that nadir. Most of these countries have plenty of fiscal and/or monetary stimulus headroom. And this superior growth and better national finances are available at a significant discount to developed markets. A languid US dollar will enhance local currency returns in these “risk assets”.

The global markets surged in 2020 despite the COVID-19 pandemic. While we expect the liquidity-driven rise to continue for a while, we should be prepared for the tide to eventually turn. We identify Japanese industries, notably “Delta ESG” stocks, that could become sources of alpha in the post-pandemic world.

The Nikko Asset Management Global Equity team philosophy is based on the belief that investing in ‘Future Quality’ companies will lead to outperformance over the long term. This paper draws on academic evidence to outline the three fundamental concepts which underpin our definition of ‘Future Quality’ investments.

Although some on the committee agreed with the market consensus for a moderate continuation of economic growth and equity markets, and a few were even more cautious, especially regarding increased fears of inflation later in 2021, the majority agreed with a more positive scenario in which the global economy outperforms market consensus, while equities, especially those outside of the US, rally sharply.

Japan struggles with an aging and shrinking population and it is important for the country, both from an economic and social perspective, to improve its relatively low labour productivity by efficiently utilising its human resources.

US presidential election jitters and an uptick in COVID-19 cases in the US and Europe triggered a downturn in global equities in October. Asian stocks, however, managed to turn in decent gains for the month, owing to a slowing pace of COVID-19 infections in the region and growing optimism over China’s economic recovery. The MSCI AC Asia ex Japan Index rose 2.8% in US dollar (USD) terms over the month.

We discuss the reasons behind the Japanese equity market’s recent outperformance and the factors likely required for the gains to be sustainable in the longer term. We also assess the recent surge by the Mothers Index and key points to watch going forward.

In order to gain a range of perspectives on the US presidential election, Nikko Asset Management has gathered the views of the following experts and investment teams, representing many of our major asset classes and geographical regions.

With the global outbreak of COVID-19 in the first half of 2020, the world was turned upside down. Under such circumstances, Japanese companies are now faced with new challenges to adapt to this “new normal”.

After three consecutive months of strong gains, Asian stocks finally succumbed to profit taking in September triggered by concerns that the global recovery from the COVID-19 pandemic could be running out of steam.

Although the coronavirus outbreak has caused major disruptions and geopolitical risk is on the rise, markets are looking forward to recovery. In what appears to be a rapidly changing world, many things remain the same and indeed, may be changing for the better.

The Covid-19 pandemic has accelerated the adoption of internet-based healthcare services. Growing in importance, penetration and acceptance, telemedicine will revolutionise and augment Asia’s healthcare systems.

Yoshihide Suga, Japan’s new prime minister, is widely expected to retain his predecessor’s fiscal and monetary policies known as “Abenomics”.

Clearly, it remains difficult to predict events in this volatile environment, but in the interest of our clients, we do our best and fortunately this time, we had virtually unanimous agreement on a similar scenario as in June, both politically and economically.

The price bifurcation of ASEAN equities this year caused by the COVID-19 pandemic is creating ample stock-picking opportunities for long-term investors. Read on to find out which markets and sectors in the ASEAN region that we have the highest conviction in.

Asian stocks posted gains for the third consecutive month, boosted by positive COVID-19 vaccine developments around the world, the persistently weak US dollar (USD) and resilient Chinese economic data.

Internet companies have gone from strength to strength, dramatically outperforming the broader market year-to-date.

It does not seem that there are enough differences between Abenomics and the proposed economic policies of likely new Prime Minister Suga to justify the completely new portmanteau “Suganomics,” as a few analysts have suggested.

In late August the Nikkei made a full recovery from the "Corona shock" lows touched in March, amid initiatives by the government and the central bank.

Although it is fairly clear that Buffett’s investment is not just a passive one in that he intends to collaborate on business ventures with these trading companies, the fact that the world’s most famous investor has committed to such large sums has ramifications for both domestic and international perceptions about Japanese equities.

Many media reports are suggesting that Yoshihide Suga is leading the race to be Japan’s next prime minister, with a main question being whether he, without a large faction of his own, will just be a temporary placeholder for new leader.

It is attention-grabbing for some analysts and soothsayers to speculate on politics, but this is no casual matter.