BNP Paribas Asset Management

The rally that took yields on 10-year German sovereign bonds down to 0.04% on 17 April has since turned into a full scale rout. Data on the level of inflation in the eurozone, released in the first week of June 2015, has not helped matters. The annual rate of inflation in the eurozone was 0.3% in May 2015, up from 0.0% in April according to the flash estimate published on 2 June 2015 by Eurostat (the European Union’s statistical office). Exhibit 1 below illustrates how the headline inflation rate has bounced backed into positive territory since the start of 2015.

Before 17 November 2014, foreign investors only had exposure to Chinese equities via Chinese listings on the Hong Kong Stock Exchange. Only institutional investors were given access to the Shanghai and Shenzhen stock exchanges via the Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Foreign Institutional Investor (RQFII) programmes. For the average onshore retail investor, there was no option to own investments outside of China except through onshore Qualified Domestic Institutional Investor (QDII) products.

In the first two weeks of May 2015 yields of US Treasuries and German Bunds have showed some tentative signs of stabilization after rising sharply in the second half of April.

We believe a favourable combination of external and domestic factors, coupled with relative attractive valuations, have put Asian equities in a “sweet spot”. With the Standard & Poor’s 500 and Nasdaq indices breaching all-time high levels pushing P/E multiples for the MSCI United States index to above the 5-year historic average, some investors are likely to re-think their portfolio in search of more attractively valued investments.

Assets managed by official institutions have risen significantly in recent years making them a powerful force in financial markets. A recent report highlights the fact that in the face of sub-optimal returns from traditional investment strategies, official institutions are increasingly diversifying their holdings into riskier assets.

We are more than a quarter of the way into the year which has promised much in the way of excitement and drama ‑ and delivered very little. For most investors, that is good news, even as it is not such good news for those looking to profit from volatility.

Following weaker-than-expected US data in the first quarter and broadly lower sovereign yields, fixed income investors have been fixated on two near-term themes: Firstly, how the FOMC will react to the recent data; and secondly, what foreign exchange reserve managers will do with their money. Not surprisingly, each theme will materially impact the other.

When it comes to renewable energy, many investors are being put off by three myths that could lead them to miss out on the opportunities presented by a revolution in energy generation. That’s the view in a recent paper from David Richardson of Impax Asset Management, BNPP IP’s environmental market specialist partner.

Since the end of the Bretton Woods exchange rate regime in 1973, the US dollar has undergone protracted periods of appreciation and depreciation on foreign exchange markets. Such periods have been associated with a wide dispersion in the returns of various asset classes at both global and national levels with performance depending on the particular factors driving the dollar’s valuation on exchange rate markets.

Will the recent decline in inflation impact the path of US monetary policy rates in the near term? Inflation has received increased focus this year as the US Federal Reserve (Fed) prepares for “lift-off”, with one leg of their dual mandate below target. Inflation data has drifted lower, potentially impacting long-term price stability. This has occurred despite persistent strength in labor markets leading some to speculate that global deflationary forces have migrated to US soil.