Investment Insights

Asian stocks brushed aside uncertainties posed by new COVID-19 variants and climbed higher in January. The MSCI AC Asia ex Japan Index rose 4.1% in US dollar (USD) terms over the month.

The US Treasury (UST) yield curve steepened in January. The prospect of increased federal spending in the US prompted a sharp upward move in UST yields at the start of the year.

In 2020 the COVID-19 pandemic negatively affected a wide variety of Japanese assets, including the real estate investment trust (J-REIT) market. J-REITs have bounced back since, but their recovery has been sluggish compared to the Japanese equity market’s rebound. Despite the slower recovery, we believe J-REITs have ample upside room once the rise gathers pace.

We look into the potential economic impact of Japan’s attempt to become carbon neutral. We also analyse why Japan’s fiscal condition draws little attention although the country is on course to spend a record amount in its upcoming budget.

The Australian bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) returned -0.42% over the month. The yield curve steepened as 3-year government bond yields ended the month flat at 0.11%, while 10-year government bond yields rose by 16 basis points (bps) to 1.13%. Short-term bank bill rates were unchanged.

The S&P/ASX 200 Accumulation Index returned 0.3% during the month. Australian equities outperformed most key offshore markets during the month as equity markets saw a pull-back late in the month. COVID-19 cases passed the 100 million mark globally and many countries continued to struggle with COVID-19 variant strains and vaccine supply issues.

Our philosophy is centred on the search for “Future Quality” in a company. Future Quality companies are those that we believe will attain and sustain high returns on investment.

Worldwide, 2020 was unequivocally dreadful; a year of loss, pain, anxiety and separation that found no worthy adversary in technology or social privilege.

The Australian bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) returned -0.27% over the month. The yield curve steepened as 3-year government bond yields ended the month flat at 0.11%, while 10-year government bond yields rose by 7 basis points (bps) to 0.97%. Short-term bank bill rates were largely unchanged.

The S&P/ASX 200 Accumulation Index returned 1.2% during the month. Australian equities lagged key offshore markets during the month. Despite COVID-19 cases rising exponentially in the US and Europe, the start of the vaccine roll-out and further certainty regarding the US election result saw equities move higher.