Will the “Phase One” Trade Deal Bring More Stable Relations Between the United States and China?
Yes, in the near term, but longer term we expect trade, tech, and possibly finances to decouple further.
Asia/Pacific
VantagePoint: Disruption, Demographics, and Decoupling
The start of a new year and a new decade is an opportune time to reflect on megatrends that will be consequential over the next ten years. In this edition of VantagePoint, we focus on three such trends and their investment implications: disruption, demographics, and decoupling.
Does a Dovish Fed Doom the US Dollar?
No, we do not think Federal Reserve rate cuts signal a major downturn in the US dollar.
Does an Extended US-China Trade War Change the Strategic Investment Case for China?
No. While we do not expect the trade war to end after President Trump and President Xi meet this week at the G20 in Japan, we have not changed our view that investors should consider dedicated allocations to China broadly and A-shares in particular.
Should Investors Allocate to Public or Private Chinese Investments?
Public and private Chinese equities both present attractive investment opportunities today.
Should Investors Chase the Rally in China A-Shares?
Yes, but only if you can tolerate the volatility.
The Case for Dedicated China Exposure
While we have advised a gradual approach to investing in China, today we believe that investors should take a systematic and comprehensive approach, overweighting Chinese assets relative to their index weights. Looking past the uncertainty and negativity, investors will find a large investment opportunity set, a robust universe of public and private managers, and appealing public equity valuations.
Will the Addition of Chinese A-Shares to MSCI’s Global Indexes Trigger an A-Share Rally?
No, MSCI index inclusion will not trigger a bull market in Chinese A-shares. Given the very modest initial weights and the lack of clarity on future increases, we doubt that index-driven flows will drive share prices meaningfully higher.
Abenomics and Japanese Equities: A Promising Outlook, But Risks Remain
Japan’s long-term economic outlook looks brighter, and the positive structural and governance changes achieved under prime minister Shinzo Abe have improved the opportunity set for long-term institutional equity investors. This progress—paired with improving corporate fundamentals and reasonable valuations—boosts the appeal of Japanese equities. But, several ongoing internal and external risks to the reform agenda and economic outlook require monitoring.
Australia Outlook 2018: Reaching a Tipping Point
Though the risk from rising rates is potentially higher in Australia than elsewhere given household debt levels and the state of the housing market, we judge the risks and outlook as balanced and advise investors to remain neutral on equities and risk.