Nikko AM makes ad-hoc cut to global equities weighting

Nikko Asset Management’s Global Investment Committee has ordered a cut in the manager’s overweight exposure to global equities, following an “extremely rare” ad-hoc meeting.

The Committee decided a “neutral” weighting would be more suitable, in light of factors such as the ongoing situation in Ukraine, and an ongoing cautious stance on China.

The Asian country looks increasingly vulnerable to shadow banking devaults and falling property prices, the manager said. Other reforms, while positive in the long run, will cause short term difficulties, posing a threat to the consensus outlook, it added.

Meanwhile, the strong run in US equities over the past year has raised concerns that there are downside risks, such as weaker earnings growth in respons to recent poor weather.

Regarding the Ukraine situation, the Committee believes that the most likely outcome is that there will be a type of ‘Finlandisation’ of the country, with the pro-Western parts unable to fully join Nato or the EU in order to maintain required relationships with Russia, for example, to ensure energy supplies. A risk does remain that the situation could escalate, with local populations engaging in fighting. However, Nikko AM says that “hopefully, they will realize that the Yugoslavian break-up is not a good model and that ethnic cooperation is essential.”

“In sum, it is extremely rare that we make ad-hoc decisions like this, and it is meant to be temporary until we meet on March 27th in full session to make a final decision.”

 

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