Crossing the threshold

The Asian growth story is an enduring multi-decade shift that belies the recent short-term noise around Chinese stockmarket volatility and falling demand for commodities. Even taking into account a slowdown in growth, the populations of Asian countries are still increasing their levels of wealth faster than their Western peers. In China, meanwhile, the transition to a consumption-based economy continues apace – with news that for the first time ever the size of its middle class population exceeds that of the US.

This kind of development supports our view that investors would be well placed to focus on the long term trends and consider adding exposure to Asian economies. This is especially the case at current valuations where the debt of even profitable, blue chip companies enjoying strong government support is trading at attractive yields.

Sarah Percy-Dove – Standish, a BNY Mellon company

The Asian growth story is an enduring multi-decade shift that belies the recent short-term noise around Chinese stockmarket volatility and falling demand for commodities. Even taking into account a slowdown in growth, the populations of Asian countries are still increasing their levels of wealth faster than their Western peers. In China, meanwhile, the transition to a consumption-based economy continues apace … read more

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Do ‘baby boomers’ really have their finances sorted?

Demographic data shows that across the globe populations are ageing. The post-World War II ‘Baby boomer’ generation – is now entering or approaching retirement. In the UK, there are more than 22.7 million people aged 50 years and over, representing more than a third of the total UK population.[1]

While they may appear to be entering retirement from a position of relative financial strength, the reality of the situation is far more challenging. The first priority for most people will be financing their own retirement with an income they can live off to replace their salaries. As people can now expect to live longer, they need to be sure their investments are suitable to provide for this. Further, many people will have an important second objective of preserving capital in order to bequeath their wealth to their dependents.

With interest rates unlikely to rise dramatically in the near future, income returns on assets such as government bonds and cash deposits remain at historic lows, and in many cases below the rate of inflation. Our view is that a focus on dividend-paying equities can offer investors the comfort of an attractive income stream in an otherwise low-return environment, and provide a shield against inflation.

Nick Clay – Newton, a BNY Mellon company

[1] Mid-2013 Population Estimates, UK Office for National Statistics, 2014

Demographic data shows that across the globe populations are ageing. The post-World War II ‘Baby boomer’ generation – is now entering or approaching retirement. In the UK, there are more than 22.7 million people aged 50 years and over, representing more than a third of the total UK population.[1] While they may appear to be entering retirement from a position … read more

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What’s really going on with the Japanese economy?

One of Prime Minister Shinzo Abe’s initial economic arrows was aimed at pulling Japan out of deflation to move closer to the Bank of Japan’s 2% target. While that is yet to be achieved there are some encouraging on-the-ground indicators: Wages are going up as evidenced by the data on part-time workers. This is the first sector of the labour force to see wage increases because corporations are more reluctant to increase the compensation of full-time and permanent staff in the early stages of a recovery. Nevertheless, this demonstrates how much employers are willing to pay to attract the ‘marginal worker’, so the fact these pay packets have been expanding is a positive sign.

The inflation rate (CPI) minus energy and food is also close to 1%. We call this the ‘core core’ reading and I believe it is a more important metric to keep an eye on than CPI. Additionally, living in Tokyo, inflation feels higher still. The University of Tokyo Daily Price Project, which tracks daily point of sales data, currently shows a reading of around 1.5%, which feels much closer to reality. Abe has made an impressive start towards an inflationary environment; a commendable achievement against a global backdrop of prices under pressure.

Miyuki Kashima, BNY Mellon Japan

One of Prime Minister Shinzo Abe’s initial economic arrows was aimed at pulling Japan out of deflation to move closer to the Bank of Japan’s 2% target. While that is yet to be achieved there are some encouraging on-the-ground indicators: Wages are going up as evidenced by the data on part-time workers. This is the first sector of the labour … read more

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The 30-year view

For those with a penchant for jarring juxtapositions, a then-and-now comparison of current versus mid 1980s macro-economic data makes for interesting reading.

A time traveller from three decades ago might have expected to find flying cars, self-lacing running shoes and other mainstays of science fiction. What they would not have expected was a global economy dominated and distorted by QE, ZIRPs and NIRPs.

In our analysis, October 2015 is characterised by a loss of momentum in economic activity around the world – even amid persistently low interest rates in leading economies, and despite the fact that the main central banks either remain engaged in QE programmes or have yet to sell any of the assets acquired under them previously.

Hindsight is a wonderful thing but we believe future investors looking back will question why the current crop of central bank policies were ever thought to be reasonable.

James Harries – Newton, a BNY Mellon company

For those with a penchant for jarring juxtapositions, a then-and-now comparison of current versus mid 1980s macro-economic data makes for interesting reading. A time traveller from three decades ago might have expected to find flying cars, self-lacing running shoes and other mainstays of science fiction. What they would not have expected was a global economy dominated and distorted by QE, … read more

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