Japanese Equities

Japanese equities continue to be significantly impacted by the movement of the Yen. However, valuations remain compelling when compared to US equities. Monetary policy changes have been muted over the last several months. The BOJ has now set a goal of maintaining a 0% yield on the 10 year bond. This has resulted in the yield curve steepening as longer dated bonds have lost value under the prospect of higher inflation.

The imminent tailwinds from further Yen depreciation and monetary policy have diminished somewhat over the last 6 months.

Asian/ Emerging market equities

Asian and Emerging market equities remain attractively priced, although the sentiment towards them is mixed. Some investors believe that Donald Trump will enact policies which will significantly impact emerging market economies, especially those with an export dependence. Furthermore, dollar strength has always been seen as a negative for emerging markets which often have borrowings in dollars. However, these arguments have resulted in a severe discount of these markets against developed peers which appears unjustified.

Additionally, growth has begun to accelerate in many emerging economies supported by demand growth in the developed world. Sentiment towards Asian and emerging market equities has already begun to improve, however, there is some way to go until this has fully recovered after many years in the doldrums.

Property

In the short term the performance within the property sector will be mostly influenced by currency and equity market changes, however, global property should drive the longer term returns. The outlook for more normalised global inflation and faster economic growth, property remains a good asset class to exploit this.