More radical central bank policies and implications for stock picking

Nikko AM

Nikko AM

Risk taking within the financial markets have been in place for some time, with Central Banks setting interest rates at negative levels in real terms. Negative yields on long duration sovereign bonds are now being accepted as normal, with riskier assets trading at record levels. In this article we look at whether or not this approach is now past its sell-by-date and if so what are the implications for stock picking. Given the importance of central bank policies on the pricing of assets, the focus has to be what they do next. If debt monetisation does occur, leading to a more inflationary scenario, it will have significant implications for equity investing in terms of duration, leverage, geographical and political risk and asset intensity. Given that, we look at a ‘what if’ scenario for debt monetisation and the fall out if it did occur. (VIEW LINK)

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Nikko Asset Management is one of Asia’s largest asset managers, providing high-conviction, active fund management across a range of Equity, Fixed Income, Multi-Asset and Alternative strategies. In April 2021, Yarra Capital Management acquired...

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