The Tokyo-headquartered investment house has adjusted its asset allocation position, driven by a more positive view on global equities as 2016 beckons.

Nikko Asset Management, the Asian investment house with $146.4 billion of assets, has decided to take a more bullish stance on global equities because it expects growth in the US to drive corporate earnings.

The asset manager had been neutral on global equities but is now moving to a “moderately overweight” position, according to a statement from the firm yesterday. 

The investment committee of the firm remains underweight, or bearish, on global bonds; Nikko Asset Management also predicts further appreciation by the dollar in the foreign exchange market.

“Our new macro-backdrop scenario had moderately more positive ramifications for global equities, with the US rising mildly but the other regions posting substantial gains,” John Vail, chief global strategist and head of the global investment committee at the firm, said. “We forecast that global equities will continue to rise, especially developed markets outside of the United States, but we do not wish to be aggressively overweight."

Nikko AM said it expects equities in Europe, Japan and Asia-Pacific excluding Japan to outperform over the next six months. Conversely, the US stock market, it said, should underperform on a relative basis, leading the committee to adopt an underweight stance on US equities.

Eurozone equity prices in US dollar terms should rebound after three quarters of weakness due to the euro’s fall, with corporate earnings and continued regional economic expansion driving growth, the firm said.

Japanese corporate earnings are improving and the reflationary, supply-side reform policy approach of the Abe administration bodes well for the country’s markets, the asset manager continued.

“We believe Abenomics is working well, especially for corporations, with third quarter pretax profit margins soaring to historical highs for both manufacturing and non-manufacturing sectors,” Vail said. “It is, thus, working very well for equity investors too, and should continue to do so, in our view.”

The firm expects the dollar to be strong next year because the Federal Reserve is expected to raise interest rates at the end of this year and continue tightening policy next year, contrasting with accommodative monetary policy in most other major economies.

Finally, Nikko AM expects the price of crude oil to stabilise following the recent sharp declines, helped by an expectation of firm economic growth.