Insights

China’s focus on boosting domestic consumption as their top policy priority in 2025 sets a positive trajectory. The ability of individual countries to provide domestic stimulus is going to be crucial in limiting the impact of global growth slowdown brought on by US policy uncertainty.

The Global Investment Committee (GIC) held an extraordinary session to review the macroeconomic and market impact of tariffs announced by the US on 2 April, as well as subsequent actions and market reactions. The GIC’s verdict is that while the US may avoid a recession, risks of slower growth loom large.

The US markets have dominated global portfolio flows, but investors may seek alternative investment destinations if the ongoing change in trade dynamics results in an extended period of elevated US risk premiums. With US tariff policies setting in motion significant fundamental changes, Asia emerges as a potential destination for capital reallocation.

Amid the challenges facing China's property market, work is well under way to restore confidence in the housing sector. It remains an uphill task for both Beijing and the country's property groups, but there are signs of renewed investor interest in the Chinese property bond market as the housing sector's outlook is expected to improve.

Against this more challenging but still benign macroeconomic backdrop, we expect Asian corporate and bank credit fundamentals to stay　resilient, aside from a few sectors and specific credits which may be affected by tariff threats or geopolitical dynamics.

In a key development for New Zealand’s fixed income market, official figures suggest that the Reserve Bank of New Zealand has won its fight against inflation. We feel that the victory has come at a cost, however, given the significant impact interest rate rises have had on consumers and businesses.

The "Liberation Day" US tariffs are expected to strongly impact Asia, where most countries run a trade surplus with the US. Although significant uncertainty is likely to linger, our base case is for most of the region's economies to negotiate with the US and thus mitigate much of the impact from the initial announcement. Regarding Asian local government bonds, we retain a positive outlook for several countries that have the capacity to pre-emptively implement monetary and fiscal policy responses. Most Asian corporates and banks also entered 2025 with strong balance sheets and rating buffers, which could cushion them during this period of high volatility.

New Zealand’s equity market struggled in the first three months of 2025 amid global uncertainty due to trade tariffs imposed by the Trump administration. Although the market news flow was quiet in March overall, some notable developments occurred in the area of renewable energy generation.

The US tariff-induced turmoil could slow the pace of the Bank of Japan’s rate hikes, but the cycle of wages and prices, which has made the central bank confident about monetary tightening, is expected to remain intact over the longer term.

The US recently announced a new reciprocal tariff policy. The announcement led to increased stock market volatility globally, reflecting concerns about a potential trade war. There could still be opportunities for those who can navigate market volatility. The US's strategy, perceived as a high-stakes game, has led to uncertainty. The response from surplus-holding nations and global market dynamics will be crucial in shaping the economic landscape.

We discuss the implications of the expansive new tariffs unveiled by the US and explore the effects on markets, consumer sentiment and potential future outcomes from a Japanese market perspective.

The Nikko Asset Management Global Equity team's investment philosophy is based on the belief that "Future Quality" companies will outperform over the longer term. When macroeconomic drivers are uncertain, diverse and unique alpha sources are even more essential.

We downgraded our defensive position marginally, while we maintained an overweight to growth assets.

With the US “exceptionalism” narrative fading, we see value in global diversification. We observe potential turning points in Europe and China equities that may serve as opportunities to diversify global portfolios. Volatile market conditions may be the new normal, but opportunities may emerge due to greater differentiation among firms and economies.

As the rest of the world contends with the geopolitical and economic implications of Trump 2.0, ASEAN presents a wealth of long-term investment opportunities, driven by strong fundamentals and supportive policies.

We continue to believe that Asia’s local government bonds are positioned to perform well, supported by accommodative central banks amid an environment of benign inflation and moderating growth.

While US equities stumbled in February, Asian ex Japan equities gained modestly, helped by continued positive momentum in Chinese tech stocks. China's tech has been the comeback story so far in 2025 after DeepSeek injected some liveliness into the market.

Vietnam is demonstrating a commitment to improving governance, expanding infrastructure and cultivating a more competitive business environment. These efforts position Vietnam to harness its demographic advantages and capitalise on emerging geopolitical opportunities.

For 30 years, policy factors like falling corporate tax and interest rates were seen to have generated a bulk of corporate profits, reducing stock-selection opportunities. There are indications that this policy-driven earnings era is coming to an end, heralding darker days for the average firm. However, firms skilled at raising profitability in core business areas could benefit, thus creating new opportunities for skilled stock pickers.

We believe that the Official Cash Rate’s projected path to the 3% level, which we consider likely to be the lowest point of the Reserve Bank of New Zealand’s current easing cycle, may be more noteworthy than the interest rate cut in February.

February was a challenging month for New Zealand’s stock market following a weak corporate earnings season. Looking ahead, however, we remain confident about the market in 2025 and after. A key reason for this is the interest rate cutting cycle by the Reserve Bank of New Zealand that is currently underway.

We assess the factors behind the recent surge in Japan's long-term yields and its implications for equities; we also analyse the robustness of corporate earnings amid the structural economic changes taking place.

Our focus on franchise and management quality allows us to look forward with optimism, whilst balance sheet quality and valuation discipline provide comfort for when the fireworks start for all the wrong reasons.

Despite a retreat from sustainability initiatives in the US, the sustainable bond market, particularly green bonds, remains strong globally due to continued investor demand, attractive bond yields and increasing participation from countries like Japan.

For January, we reduced our overweight position in growth while maintaining our overweight position in defensives. With respect to growth assets, Trump's second presidency ushers in a new era of US exceptionalism which has implications on the rest of the global markets.

In January, the Bank of Japan raised short-term interest rates to 0.5%, the highest level seen in 17 years, as it continued with its slow but steady withdrawal of accommodation. As the Japanese economy shows ongoing signals of recovery from decades of stagnation, we assess the impact the return of interest rates could have on the country’s households, firms and government.

The Indian healthcare sector is projected to become one of the top global markets by 2030, driven by demographic changes, rising incomes, and expanding insurance coverage, presenting long-term investment opportunities.

We believe the introduction of DeepSeek may cause a recalibration of capital expenditures. Its introduction has initiated a shift towards a more cost efficient, scalable, and accessible AI landscape.

We see Asian local government bonds being supported by accommodative central banks amid an environment of benign inflation and moderating growth. Within the region, we expect investor appetite for higher carry bonds such as those of Malaysia, Indonesia and the Philippines to stay firm relative to their regional peers.

In March 2024, after the Nikkei Index reached an all-time high, we offered five structural reasons why Japan's economic resurgence was more than just a flash in the pan. Almost a year later, those five reasons remain just as relevant for investors considering an allocation to Japan.

The speed at which AI applications are becoming part and parcel of daily life is breathtaking, with DeepSeek's apparent breakthrough merely accelerating an inevitable, fundamental change in the field. We firmly believe these breakthroughs are the key components needed for sustainable, long-term returns.

The New Zealand equity market paused for breath and dipped in January after posting significant gains towards the end of 2024. Some of the market’s decline reflected a dent in enthusiasm for consumer-facing and cyclical stocks. Global market jitters also appeared to have an impact with disruption risk coming to the fore.

Although the arrival of a new year has brought some optimism after a tough 2024, economic activity remains subdued in New Zealand. The Reserve Bank of New Zealand may further cut interest rates in 2025 with global uncertainties impacting the country's economy.

This month we discuss signs of improvement in the Bank of Japan (BOJ)'s market communication following its recent rate hike; we also focus on Japan's economic resilience amid a flurry of trade-related headlines impacting the markets.

In the 2024 October-December quarter, risk assets largely moved in line with expectations surrounding the US presidential election. We maintained an overweight position on growth assets over the quarter amid indications of resilient economic conditions. Our view of defensives improved with higher yields having made this group of asset classes more attractive.

The Federal Reserve is seemingly following in the footsteps of the Bank of Japan and adopting a strategy of monetary policy gradualism. This measured approach is aimed at balancing rate cuts with inflation expectations and stabilising the economy without triggering price volatility.

We retained our positive view on growth on resilient economic data and dovish monetary policies globally as inflation is now closer to central bank targets worldwide. Our view of defensives improved as higher yields now make the asset class marginally more attractive.

The BOJ increased overnight rates by 25 basis points, raising the Mutan call rate to its highest since 2008. The decision reflects the BOJ's belief that the economy is performing in line with its view, with positive real wage growth and an upgraded near-term inflation outlook. Uncertainty over US tariffs persists, but Japan's need for AI-related technologies may play an indirect role in reducing trade-related risks.

The future of US policy is surrounded by great uncertainty, particularly regarding tariff measures that the US may impose upon its trading partners. We explore options that are available to Japan to safeguard against tariffs the US may decide to implement.

Despite concerns about Donald Trump's impact on emerging markets, historical data shows that during his first term as US president, China, South Korea and Taiwan outperformed the S&P 500 although they are the most trade-sensitive equity markets.

We expect Asian local government bonds to perform well in 2025, supported by accommodative central banks amid an environment of benign inflation and moderating growth. The ongoing global easing cycle is expected to lower global yields, further supporting Asian bond markets.

Following the surprise result of the snap election in October 2024, Japanese politics has entered a very unique phase. We discuss how the fluid political situation could positively impact the Japanese market, which is already feeling the benefits of corporate governance reform, and assess how engagement could play a role in improving shareholder returns in such an environment.

This month we discuss how a rise in delistings reflects efforts to create a more attractive equity market; we also assess ways in which a merger by large automakers in Japan could stimulate reforms beyond the industry.

We retain our positive view on growth on resilient economic data and dovish monetary policies globally as inflation starts to ease worldwide. As for defensives, sovereign bond curves are steepening amid the beginning of the global rate-cutting cycle and bonds are gradually becoming more attractive.

The Fed and the BOJ both made interest rate decisions that were in line with market predictions, with the former cutting interest rates and the latter standing pat on policy. However, uncertainty around future policies and potential impacts of U.S. fiscal and trade policy changes have led to market volatility.

Our comprehensive analysis of the Yanagi Model, which provides an example of how sustainability issues have become a key part of corporate governance practices, showed that ESG integration can drive shareholder value. The significant correlations found, especially in social and governance factors, require our attention; moreover, the analysis shows that integrating ESG factors is essential for long-term value creation.

In what has turned out to be an eventful year for interest rates, one of the major factors for New Zealand's bond market in 2024 has been the impact of monetary policy. We expect the Reserve Bank of New Zealand to continue monetary easing in 2025. In addition to monetary policy, the forthcoming Trump presidency will be another key factor for the bond market in the coming year.

The Reserve Bank of New Zealand began cutting interest rates late in 2024 and is anticipated to ease further in 2025. The interest rate environment is expected to be a positive factor for the equity market, which has seen the retail and property sectors suffer in particular under higher rates.

We have upgraded our near-term economic outlook for the US and anticipate Japan's "virtuous circle" to remain intact. Predicting the timing of any cyclical market downturn remains challenging. However, we also highlight heightened tail risks associated with policy disappointments in the US going into 2025. We continue to see risks as biased towards the inflationary, and we also foresee expansionary US fiscal policy as ultimately unsustainable.

China has been feeling the pressure with Donald Trump due to return for his second term as US president. However, during Trump's first term China actually outperformed the S&P 500 index, which demonstrates the importance of domestic policies over external pressure.