The committee said that the views centre on a belief there are stronger prospects for the global economy following the election of Donald Trump as US President, and on expectations of a hawkish monetary policy by the US Federal Reserve.
The committee met on 19 December to review global economic conditions, following an ad-hoc meeting in late November. At the ad-hoc meeting, it maintained its positive view on Japanese equities, while moving to a slightly overweight stance on global equities.
Nikko AM chief global strategist John Vail said: “This is the most positive view that the global investment committee has had on global equities in a long time. Although the surprising Trump victory carries many uncertainties, the net effect for global economic growth and corporate profits has clearly improved. This justifies an overweight stance on global equities, particularly for the United States and the developed Pacific ex-Japan region.”
“Although there is uncertainty about how Trump will deliver, the GIC believes his goal is clear: to spur investment and create new jobs in the United States through lower corporate taxes and decreased regulation. The committee thinks US equities benefit in the intermediate term, forecasting the S&P 500 to stand at 2478 at the end of June and 2533 at the end of 2017.”
Nikko AM also expects European and Japanese equities to perform well in local currency terms, backed by strong US and global growth, but gains are likely to be limited in dollar terms.
The committee forecasts Japan’s half-year GDP growth will be 1.9%, with the TOPIX rising 10.1% in yen terms over the six months to June 2017. It expects half-year GDP growth of 1.9% in the eurozone with the MSCI Europe rising 8% in euro terms over the six months to June.
