In the asset manager’s 2015 outlook, Nikko AM global head of multi-assets Al Clark said the Japanese equity market is still attractive after experiencing “solid” returns in 2014.
“[Also] 2015 will see further developments in Prime Minister Abe’s ‘third arrow’, which should be positive for growth assets in Japan.
“But for a country with no domestic source of energy (controversial nuclear plants aside), cheap oil is a medium-term catalyst for improving earnings,” Mr Clark said.
Mr Clark said Nikko AM has also “downgraded" US equities to "neutral” as valuations are becoming expensive and macro risks are increasing.
“US equities continue to deliver on the earnings front, so we believe it is too early to turn bearish.
“However, with the [US dollar] strength impacting competitiveness and offshore earnings, an energy sector in reversal and monetary policy set to tighten, the risks on the macro side are stacking up,” he said.
Mr Clark also pointed out that Europe is Nikko AM’s least favoured equity market as stocks are no longer cheap and they do not believe quantitative easing will solve the “growing structural imbalances”.
“Our expectation is for unrewarded volatility as periods of policy-drive euphoria give way to underlying structural weakness and disappointing growth,” Mr Clark said.
