Insights

The global economy should match the consensus for strong growth, thanks to vaccinations, continued fiscal stimulus, acceptable global geopolitical conditions, and continued low interest rates despite increasingly hawkish central banks. Such, via increased corporate profits, should allow equity markets to perform very well ahead, with impressive returns in each region, particularly in Japan.

The just released 3Q CY21 data on aggregate corporate profits in Japan was very positive, as although for the single quarter, the overall corporate recurring pre-tax profit margin declined from the 2Q, as it does routinely for this non-seasonally adjusted data.

Just a few weeks ago I attended my first in-person conference since 2019. Over 40,000 people descended upon Lisbon for Web Summit, one of the world’s largest technology conferences. The event brings together CEO’s and founders of established firms together with start-ups and policymakers to discuss and pitch ideas over the course of a week.

As the global economy takes steps to recover from the pandemic, prices have steadily risen around the world. Japan, however, remains an exception among the major economies. The country’s headline CPI did tick up in October, but at a very modest pace, showing that inflation is yet to gain strong traction in a country long stuck in deflation.

Every few years, concerns emerge over whether China is investable. We are currently witnessing the latest round of this cycle amid China’s drive to regulate. However, investing in China during such moments of doubt has reaped substantial returns in the past. The key is not missing the forest for the trees when China is regulating in order to innovate.

Asian stocks rose in October, with investors remaining focused on rising inflationary pressures and the US Federal Reserve’s tapering plans. The markets’ key concern is China’s economic performance and its impact on the energy and commodity complexes.

We expect Indonesian bonds to outperform, as demand is supported by positive supply technicals. Meanwhile, we see bonds of low-yielding countries like Singapore, South Korea and Thailand prone to bear flattening, driven mainly by UST movement.

Japan’s rapidly advancing medical technology is viewed as a way to address the healthcare sector’s inefficiencies while at the same time offering potential value opportunities.

We explain how the recent lower house election win gives Japan’s new prime minister a free hand to pursue policies aimed to help the economy recover from COVID-19. We also analyse why a weaker yen no longer provides as much of a boost to equities.

Our philosophy is centred on the search for “Future Quality” in a company. Future Quality companies are those that we believe will attain and sustain high returns on investment. ESG considerations are integral to Future Quality investing as good companies make for good investment.

US Treasury (UST) yields rose in September, with the US Federal Open Market Committee finally alluding to moderate its asset purchases as soon as November. The rise in rates was further supported by an escalating power crunch across Europe and China amid surging energy prices prompting concerns about inflation.

Volatility has arisen as we expected it eventually would, and September is often an apt month to rediscover risk given market participants’ return from summer vacations noting that record high equity markets do not quite square with a number of significant risk events on the near-term horizon.

Asian stocks fell in September, with concerns about China’s growth outlook and the US Federal Reserve (Fed)’s taper plan being the key drivers of sentiment. For the month, the MSCI AC Asia ex Japan Index declined by 4.2% in US dollar (USD) terms.

We provide an update of Japan’s political calendar as the new Prime Minister Kishida leads the ruling party into a 31 October general election, which could have a significant market impact. We also discuss what the recent China-related volatility could mean for the Japanese market.

Out of the six scenarios presented, a narrow majority of our committee agreed again on a positive scenario in which the global economy matches the market consensus for solid growth, while equities continue to rally.

Inflation is on everyone’s mind. From central bankers to bakers, it is one of the biggest topics of discussion. The prices of many commodities are rising sharply. The reasons vary. Supply constraints, sharp rise in demand or bad weather—take your pick.

As we contemplate a post-pandemic world, it is becoming more likely that things will not return to “normal” as we once knew it. While vaccines have been highly successful in preventing serious illness in those who are still contracting the virus, the Delta variant of COVID-19 is also proving to be harder to contain.

US Treasury (UST) yields rose in August, prompted by data showing stronger-than-expected US employment growth. The rise in rates was supported by hawkish comments from some US Federal Reserve (Fed) officials.

The world is settling into a new normal that is likely to look quite different from pre-COVID-19 norms. This includes different patterns of demand shaped by learning to live with the virus and an ongoing fiscal thrust with firm policy objectives.

Asian stocks gained in August. While concerns about the spread of the Delta variant weighed on markets at the beginning of the month, the US Federal Reserve (Fed)’s dovish commentary and a rebound in the battered Chinese technology (tech) sector lifted sentiment towards the month-end

The news of Prime Minister Suga’s impending resignation triggered a rally in Japanese equities this week, with the market hoping that a new administration will bring the COVID-19 outbreak under control and hasten the normalisation of the economy. We explain what the market expects from the new administration and assess the implications of Japan’s upcoming general election.

Japan’s drive to embrace hydrogen as an alternative energy source is an opportunity to identify hidden value in firms that are willing to tackle and resolve social issues.

The just released 2Q CY21 data on aggregate corporate profits in Japan was surprisingly positive, as the overall corporate recurring pre-tax profit margin surged relatively near its record high in the 3Q CY18.

The three Japan-related news topics that have overwhelmingly dominated the attention of Western media so far this year are COVID-19 (by far), the Tokyo Olympics and the showdown at Toshiba.

The Tokyo summer Olympics have been a welcome distraction over the last few weeks and well done to Japan for hosting the games so successfully in the current environment. In particular it is inspiring to see the years of preparation and planning being showcased by the top competitors in their respective sports.