Insights

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

Japan’s economy should boom after the Olympics burden passes. Its stock market will likely rebound sharply too, but one item that has limited Japan’s equity culture, and thus, its wealth, especially for wary pensioners, is overly conservative guidance by corporations for upcoming fiscal year earnings.

Asian stocks edged lower in June, partly weighed down by a recent spike in COVID-19 cases in the region. Lingering worries about rising inflation and fears of a faster-than-expected tapering of the US Federal Reserve’s quantitative easing programme also dampened sentiment.

The US Treasury (UST) yield curve flattened in June, with short-dated bonds underperforming. The Federal Reserve’s (Fed) hawkish pivot caused the UST curve to flatten aggressively mid-month.

We discuss what global inflation could mean for Japan, with the country having struggled extensively with deflation; we also assess the BOJ‘s plan to boost funding for mitigating climate change and what that could mean in the longer run from a corporate governance perspective.

The momentum gained by the global credit market in 2020 has continued into 2021 and we appear to be on track for another strong year of performance. Low government bond yields, ample liquidity and improving credit quality have supported a market that now trades with spreads at all-time lows in some pockets.

Japan’s stock market does not deserve many of the ages-old worries and criticisms. Indeed, while not every company or circumstance is perfect, its performance, though lower than that of the US, has steadily outperformed, in constant currency terms, its other main global market rival, Europe, since late 2012 when Shinzo Abe was elected to lead the LDP.

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

After many years of trying to stimulate inflation, central banks are now facing inflation levels that are far exceeding recent trends. In May, eurozone inflation rose to 2% and in the US core inflation reached 3.8% (almost a 30-year high).

The 2007-2008 global financial crisis had a lasting impact on public and private pension funds, as the collapse of Lehman Brothers and massive fraud committed by Wall Street money manager Bernie Madoff placed greater emphasis on fiduciary obligations and manager due diligence.