Insights

In April, the Japanese market gained more than the US against a backdrop of rising US long-term yields, which resulted in a depreciation of the JPY and an increase in the yield on 10-year JGBs. Rising WTI oil price futures also supported the market. 

Portfolio Manager Lilian Co perceives April macro data to be largely in-line with expectations, with Inflation remaining in check.

In March, the Japanese market declined, with President Trump’s worldwide trade sanctions dragging down market sentiment. Foreign investors turned to net buyers in late March, whilst domestic individuals turned to net seller.

The correction of US equities in February, which was more technical in nature than anything, spread to March as political drama came to the fore. 

In March, NYMEX WTI CRUDE was up 5.35% to finish the month at $64.94. During the month, the US 10y treasury yield decreased 4.25%, closing at 2.7389.

March turned out to be another volatile and poor performing month for European Equities. In spite of a solid earnings’ season, and expectations for continued positive earnings’ momentum, very few companies in Europe traded upwards post their annual release. 

March was a difficult month for equity markets, with high volatility, which nevertheless was lower than during the previous month. The MSCI Europe Index lost ground (-2.35% in March, -4.87% year to date), dampening the bullish reaction, which had characterised the second half of February. 

In March, the most awaited economic data were unemployment figures, in particular the average hourly earnings, which rose by 2.9% YoY (the most since 2009) in January and led to market turmoil on the back of inflation fears.

​In March, the Japanese stock market continued to be subject to sharp movements, influenced by the protectionist stance taken by US President Donald Trump and related media reports. Further, setbacks for US technology stocks also had a negative impact. The TOPIX closed the month at 1,716.3 (down 2.9% MoM), while the Nikkei 225 finished the month at 21,454.3 (down 2.8% MoM). 

In March, market sentiment was dominated by trade disputes, with daily stock market movements dictated by Donald Trump’s tweets. The month started with the US imposing import tariffs on steel and aluminum globally, however later in the month it transpired that these measures targeted import tariffs on Chinese goods. 

February marked the return of volatility to European financial markets. Volatility picked up on Friday, 2nd February with the rise in average hourly earnings growth in the US from 2.5% year-on-year in December to 2.9% in January. This, combined with a recovery in price inflation, lead investors to reassess the Fed’s policy outlook significantly. 

In February, the U.S. equity markets were subject to a correction after a long run, which had been marked by particularly low volatility, urging questions such as: (1) if the sell-off had been caused by rising rates? and (2) if this correction would alter the Fed’s path? 

​In February, the Japanese market declined sharply, triggered by a sudden increase in market volatility, especially in terms of VIX-linked derivative trading, which created large financial losses. During the month, the market at times moved with a lack of direction, leading investors to shy away from investments. 

Market volatility spiked abruptly between the end of January and the first half of February, leading equity markets to fall and the positive mood, which had characterised the beginning of the year, to quickly be replaced by a widespread sense of fear.

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On 2nd February, average hourly earnings rose by 2.9% YoY (the most since 2009), leading market participants to immediately modify their inflation projections and revise their Fed funds’ forecasts. Throughout the month, US Treasury yields rose significantly, causing a correction in equity markets and a sharp increase in volatility.

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​In February, NYMEX WTI CRUDE was down 4.77% to finish at $61.64. The US 10y treasury yield increased 5.75% to close at 2.8606, following the last and hawkish testimony by outgoing Fed Chairwoman Janet Yellen, in which she signalled a less accommodative monetary policy.

​In February, the Japanese stock market was subject to very volatile and sharp movements. The Nikkei 225 closed the month at 22,068.2 (down 4.5% MoM), while the TOPIX ended the month at 1,768.2 (down 3.7% MoM), with both indices declining for the first time in six months. 

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In February, the MSCI China Index declined by 6.4%, ending a thirteen month long winning streak, with the A share market faring slightly better and the CSI 300 Index losing 5.9%.

Strategic Japan Opportunities Fund, Winner of 'Best New Launch – Equity' at Investors Choice Awards

The award recognises the performance of the Strategic Japan Opportunities Fund since launch, taking into account a number of both qualitative and quantitative criteria. 

Lilian Co sees further upside for Chinese equity markets

Morningstar five star rated Strategic China Panda Fund returns 63% in 2017, and Lilian Co believes the market has room for a further rebate in the short to mid-term.

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