Nikko AM sees good outlook for Japan, DM Asia-Pac equities

Nikko Asset Management’s Global Investment Committeehas forecast a good six months ahead for Japanese, Hong Kong, Australia and overall developed market Asia-Pacific equities.

Supporting this outlook are factors such as low valuations of Japenese equities, and uncertainty around broader global equities becasue of near-term issues such as the US presidential election and its subsequent impact.

John Vail, chief global strategist and chairman of the Committee, said: “We have been cautious on global equities since our September meeting last year, and while they have risen 7% in US dollar terms through 28  September, global bonds have risen 10%. Our new macro-backdrop scenario continues this moderately negative view of global equities, particularly in Europe, but we are bullish on Japanese and developed Asia-Pacific equities.”

Offering its prediction of the US presidential race, the Committee sees a Clinton win, but a split Congress. And while it believes rate hikes by the US Federal Reserve in December or March can be supported by the US economy, it will be harder thereafter. Both the ECB and the Bank of Japan are expected to keep rates unchanged for the next 12 months.

Bond yields are set to remain stable over the coming two quarters, but yields on German Bunds will still be around zero by the end of March, according to the Committee’s predictions.

Key predictions

US: Half-year GDP growth (October 2016 to March 2017) of 2%. Half-on-Half seasonally adjusted annual rate (HoH SAAR), with the S&P 500 falling 1.2% in dollar terms over the next six months to March 2017.

Japan: Half-year GDP growth of 0.8% HoH SAAR, with TOPIX rising 6.7%in yen terms over the next six months to March 2017.

Eurozone: Half-year GDP growth of 0.8% HoH SAAR, with MSCI Europe falling 3.8% in euro terms over the next six months to March 2017.


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