(Pictured: Al Clark)
Nikko Asset Management will continue to fill out its suite of investment strategies for Australian investors this year, with the expected launch of several new funds, including a new multi-asset strategy later in the year.
The senior investment professionals at the former Tyndall Australia are increasingly being leveraged internationally by Nikko, including the multi-asset team in Singapore, which is run by Al Clark from Sydney. And Nikko’s international presence, mainly in Asia, is being leveraged by the old Tyndall management through an expanded product suite and additional distribution capability.
Mike Davis, Nikko AM’s chief executive in Australia, told an annual media lunch last week that the recent political leadership changes in the four major markets of China, India, Japan and Indonesia bode well for the region.
“They’re not in response to a financial crisis and they will have a broad impact on Asia and the shaping of Asian positioning on the rest of the world,” he said.
Nikko presented its annual outlook for economies and markets at last week’s briefing. Key themes included:
> the strength of the US economy and its dollar, especially in the light of an expectation that interest rates will rise
> whether or not the latest quantitative easing in Europe will work
> single-digit Australian equity returns, and
> Australia’s transitioning after the mining boom, with unemployment either going to stabilize or go up and interest rates likely to be cut, if not this week, then in March.
Roger Bridges, the Sydney-based global rates and currencies strategist, said Nikko believed there would be two rate cuts this year in Australia.
Al Clark said that his team downgraded the US in the last quarter because of valuations – “it started to get expensive”. The US was also facing some headwinds due to the lower oil price, given energy had been a strong driver of growth, and the firming US dollar. European equities represented “unrewarded volatility”, he said.
Peter Sartori, the head of Asian equities, an Australian based in Singapore, was particularly bullish on the region.
“Asia has outperformed most emerging markets over the past three-five years and we see that continuing. We now think, though, that Asia will outperform developed markets. The biggest, China and India, are performing well again, both because of improving fundamentals.”
He said that China, which had been “unloved” since 2007, was producing “better quality” economic growth, with structural reforms coming through and with the markets coming off a low base.
“And India, is probably the most bullish economic story the world has ever seen,” he said.
Asian countries are likely to be winners rather than losers from the drop in oil price. Of the 10 Asian countries Nikko invests in, only Malaysia would be a net loser because of oil.
Key growth sectors in equities in the region were: health care, insurance, tourism and the internet-related industry. Nikko has about 10 per cent of its ‘new Asia’ fund in health care.
Sartori said Asia was about to overtake Europe for tourism receipts and its internet-related industry should be attractive to Australian investors who could not get much tech exposure locally.
He also believed that both India and China would cut interest rates this year.