Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Nikko Asset Management’s New House View on Global Equities

Nikko Asset Management’s New House View on Global Equities Moves to Neutral

Less optimistic view of U.S. corporate earnings moves global equities to neutral from overweight

Shifts forecasted timing of Fed’s credit tightening to October or December 2015

China’s economy continues to struggle, but does not appear to be in a hard landing

Japanese and Eurozone equities expected to outperform over the next six months

An overweight stance on global equities that was largely in place since September 2011 has been reduced to neutral by Nikko Asset Management’s Global Investment Committee (GIC) as the committee members were less optimistic about the outlook of corporate earnings and share prices in the United States, according to the company’s latest house view. The GIC noted that it has pushed back its forecasted timing of the U.S. Federal Reserve’s credit tightening to October from September.

“We calculated that global equity valuations are at reasonably fair levels and that stocks can rise in Europe, Japan and Australia, but because we are less optimistic on the United States, we do not think it is worthwhile, especially with the recently increased volatility, to be aggressive on global equities overall,” said John F. Vail, chief global strategist and head of the GIC. “We have been overweight global equities for U.S. dollar based investors, except for one neutral quarter, since September 2011 but we now believe that neutral is the proper stance.”

The GIC members, who consist of senior investment professionals from the company’s global offices, forecasted that U.S. equities will underperform over the next six months to March 2016, thus earning an underweight stance. The S&P 500 is now trading at 16.5 times NTM (next twelve month) bottom-up consensus earnings, which is high in a historical context. Still, the GIC noted that Europe and Japan will outperform over the next six months, with the committee lifting Eurozone equities to overweight after two successful quarters of underweighting.

“Eurozone equity prices should rebound after two quarters of weakness, with rising corporate earnings and continued regional economic growth being the main factors,” Vail said. “Even though the euro in our forecast weakens against the U.S. dollar, we expect a 2.9 percent unannualized return in U.S. dollar terms through December and 5.1 percent through March so we will move to an overweight stance.”

The GIC expects Japanese corporate earnings to rise over the next two quarters after their weak third quarter performance. The committee notes that Japanese equities are expected to produce a 5.5 percent unannualized return in U.S. dollar terms through March 2016.

“We believe that Abenomics is working well, especially for corporations, with the second quarter pretax profit margins soaring to historic highs for both manufacturing and non-manufacturing sectors,” Vail said. “It is thus working well for equity investors too, and should continue to do so in our view.”

The Tokyo-based firm’s key investment committee has shifted its stance on the timing of the U.S. Federal Reserve’s monetary tightening to October and expects Fed hikes of 25 basis points at alternating meetings. In June, the GIC committee expected the Fed’s monetary tightening to take place in September.

“We believe the Fed was merely scared by the recent global turmoil and that they would later be harshly blamed if they hiked at the wrong time, so they just desired a bit more time to be sure that global markets would stabilize and not provoke an economic slowdown,” Vail said. “Everyone knows now that October is a possible meeting for the first hike. As for December, it is very close to the holidays, so it is not an ideal time for a first hike, but we would suggest that if not October, then December would be likely.”

Regarding the Chinese economy, the GIC noted that China does not appear to be in an overall hard landing despite the fact that the country continues to struggle during its transition to a more balanced economy.

“Certainly, the recent volatility in its equity market and the yuan has lessened confidence in the country’s stability, but we expect it to achieve 6.4 percent HoH (half-on-half) SAAR (seasonally adjusted annual rate) growth in the next two quarters, which is moderately below consensus,” Vail said.

Nikko Asset Management’s GIC met on September 17th for its quarterly review of global economic conditions. Based on the findings of its senior investment professionals around the world, the company periodically reconsiders house views on the major global markets and asset classes.

The committee’s main forecasts at this time are:

Japan: Half-year GDP growth (October 2015 to March 2016) of 1.5 percent half-on-half, seasonally adjusted, with equities, as measured by the TOPIX, rising about 8.5 percent in yen terms over the next six months to March 2016.

U.S.: Half-year GDP growth of 2.6 percent half-on-half, seasonally adjusted, with equities, as measured by the S&P 500, falling 0.1 percent in dollar terms over the next six months to March 2016.

Eurozone: Half-year GDP growth of 1.9 percent half-on-half, seasonally adjusted, with equities, as measured by the MSCI Europe, rising 8.0 percent in euro terms over the next six months to March 2016.

ENDS

© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

Westpac: Sets Out Plan To Go Cheque-Free

Westpac NZ has announced details of its plan to phase out cheques, after signalling in May that it would be supporting a move to other forms of payment. Cheques will cease to be available as a means of payment after 25 June 2021. Westpac NZ General ... More>>

ALSO:

NZTA: Major New Zealand Upgrade Programme Projects Go To Tender

Two major New Zealand Upgrade Programme projects are beginning tenders for construction. The New Zealand Upgrade Programme is a $6.8 billion investment to get our cities moving, to save lives and boost productivity in growth areas. The first Auckland ... More>>

Reserve Bank: RBNZ Seeks To Preserve Benefits Of Cash

The Reserve Bank – Te Pūtea Matua is taking on a new role of steward of the cash system “to preserve the benefits of cash for all who need them”, Assistant Governor Christian Hawkesby told the Royal Numismatics Society of New Zealand annual conference ... More>>

ALSO:

Economy: Double-Dip Recession Next Year, But Housing Rolls On

New Zealand's economy is expected to slip back into recession early next year as delayed job losses, falling consumer spending, and the absence of international tourists bites into growth. More>>

ALSO:

Microsoft New Zealand: Microsoft Expands “Highway To A Hundred Unicorns” Initiative To Support Startups In Asia Pacific

New Zealand, 14 October 2020 – Today Microsoft for Startups launches the Highway to a Hundred Unicorns initiative in Asia Pacific to strengthen the region’s startup ecosystem. This follows the initiative’s success in India, where 56 startups were ... More>>

Fonterra: Farmers Taking Another Step Towards New Zealand’s Low Emissions Food Production

They’re hot off the press and intended to help take the heat out of climate change. Fonterra farmers are already among the world’s most sustainable producers of milk and now have an additional tool in their sustainability toolbox. Over the last few ... More>>

ALSO:



Courts: Businessman Eric Watson Sentenced To A Four-Month Jail Term

New Zealand businessman Eric Watson has been sentenced to a four-month jail term in the UK for contempt of court, TVNZ reports. More>>

OECD: Area Employment Rate Falls By 4.0 Percentage Points, To 64.6% In Second Quarter Of 2020

The OECD area employment rate – the share of the working-age population with jobs – fell by 4.0 percentage points, to 64.6%, in the second quarter of 2020, its lowest level since the fourth quarter of 2010. Across the OECD area, 560 million persons ... More>>

Spark: Turns On 5G In Auckland And Offers A Glimpse Into The Future Of Smart Cities

Spark turned on 5G in downtown Auckland today and has partnered with Auckland Transport (AT) to showcase some of the latest in IoT (Internet of Things) technology and demonstrate what the future could look like for Auckland’s CBD with the power of 5G. 5G is ... More>>

Stats NZ: Monthly Migration Remains Low

Since the border closed in late-March 2020, net migration has averaged about 300 a month, Stats NZ said today. In the five months from April to August 2020, overall net migration was provisionally estimated at 1,700. This was made up of a net gain ... More>>

University of Canterbury: Proglacial Lakes Are Accelerating Glacier Ice Loss

Lake Tasman, New Zealand | 2016 | Photo: Dr Jenna Sutherland Meltwater lakes that form at glacier margins cause ice to recede much further and faster compared to glaciers that terminate on land, according to a new study. But the effects of these glacial ... More>>

ALSO:

Dairy: Fonterra Sells China Farms

Fonterra has agreed to sell its China farms for a total of $555 million (RMB 2.5 billion*1), after successfully developing the farms alongside local partners. Inner Mongolia Natural Dairy Co., Ltd, a subsidiary of China Youran Dairy Group Limited ... More>>

ALSO: