Global markets are transitioning from peak geopolitical uncertainty following the temporary U.S.–Iran ceasefire, supporting a gradual recovery in risk appetite. While volatility is expected to remain elevated, markets are increasingly refocusing on fundamentals. ​

In China and Hong Kong, valuations have corrected to slightly below historical averages, offering improved attractiveness, although cautious earnings outlooks may cap near-term upside. China A-shares continue to demonstrate resilience, supported by RMB strength, improving inflation dynamics, and policy backing.​

Across Asia ex-Japan, volatility remains elevated, particularly in Taiwan and Korea, though strong AI-driven fundamentals continue to underpin the technology sector. In contrast, oil-importing markets such as India and ASEAN face headwinds from higher energy costs and macro uncertainty, limiting upside despite relatively attractive valuations. Japanese equities are navigating currency and policy uncertainty, while emerging markets outside Asia, particularly Latin America, may see profit-taking as oil prices stabilize.​

In fixed income, Asian investment-grade and high-yield spreads remain tight, with duration and global rate expectations driving performance. Gold continues to serve as a geopolitical hedge amid ongoing central bank demand. In this environment, diversified multi-asset strategies with a focus on income remain key to managing volatility and enhancing risk-adjusted returns.​

Source: J.P. Morgan, MSCI, Morningstar, Data as of 31 March 2026

China / Hong Kong Equities

• While the two-week ceasefire between the US and Iran is a positive development, causing a relief reversal of market sentiment, the same core challenges remain, including whether and how the Strait of Hormuz is effectively open and the terms that could come out of the deal, if any. ​
• However, this has marked the peak of uncertainty in the market, and in the near term, we can expect a gradual pick-up in risk appetite again. The last week of March marked the near-term trough as the market priced in a rate hike, with the 2-year Treasury yield reached 4% and the 10-year yield moving close to 4.5%. ​
• Although oil prices will stay above pre-war levels for some time, and the market needs to reassess the near-term and longer-term inflation and growth risk, market reaction to headlines should start to calm down from here and gradually refocus back to fundamentals, although volatility will still be higher than pre-war levels.​
• Valuation in HK/China equities has come down to slightly below average after the correction and is getting appealing. However, earnings remain downbeat, and company guidance sounds even more cautious. This will limit the upside of the equity market. ​
• However, as the market is resetting its expectation lower for this year’s earnings, any positive development can lead to a good rebound. The stabilization of the property market is also a positive sign for the economic recovery.

China A-Shares

• RMB continues its strengthening, and it is the only currency that has not depreciated against the USD since the war. Amid the current geopolitical situation in the Middle East, the market expects that the path of moving from “petro-dollar” to “petro-yuan” will only accelerate. ​
• The importance of RMB in international trade will increase. We expect further gradual appreciation of the RMB. Also, China A-Share will continue to be more resilient during liquidity squeeze and risk off, as it has been proven during the recent market sell-off. ​
• With the recent rise in commodity prices, PPI in China will continue to move from negative to positive and will also drive CPI from a deflationary to a mild reflationary trend. This will help improve the sentiment in the consumption sector. ​
• Also, China now has a strong position going into the May Xi-Trump meeting and should provide support to the market.​

Asia ex-Japan Equities

• Asian equity markets have been highly volatile since the Iran war, especially in the Taiwan and Korea markets. However, strong AI demand and development continue to support Taiwan. Many companies with strong Q1 and whole-year outlook continue to break all-time highs despite the uncertainty of the war. ​
• With leverage built up in the market, Korean stocks have been extremely volatile, with high sensitivity to liquidity and sentiment. With the ceasefire in place, volatility will start to calm down from here. The market will refocus more on the still strong fundamentals.​
• India and ASEAN countries, which are heavy oil importers, have seen concerns over high oil prices weigh on equity markets, pressuring investor sentiment and increasing volatility. ​
• Although sentiment may improve with most countries likely to hold interest rates, the market will likely remain in a wait-and-see mode in the ASEAN markets, especially India, the Philippines, and Indonesia. Valuations are cheap, but ongoing macroeconomic challenges continue to limit upside potential.​

Emerging Market ex-Asia Equities

• Latin American has outperformed Asia significantly due to the surge in oil price which is beneficial to the oil-exporting countries such as Brazil. With hopes of the Strait of Hormuz reopening and oil prices back below USD100, there will be some reversal of capital and profit-taking from Latin America, as sentiment has been very one-sided in this region. ​

Japanese Equities

• With USD/JPY breaking above 160, given the strong USD in late March, the market was concerned about any intervention by the BOJ. Now with the two-week ceasefire and the softening of the USD, USD/JPY has moved below 160, which has reduced market concern. ​
• However, whether there will be a rate hike in April by the BOJ remains highly uncertain, with the market only priced in a slightly higher than 50% probability of a rate hike, although inflation, including living cost and wages moving higher. This will continue to hinder sentiment. 

Asia Investment Grade Bonds

• Credit spreads of Asia investment-grade bonds remain tight after the recent small correction and remain tighter than the US investment-grade bond spreads. ​
• US Treasury yields have been volatile as the market is reassessing the near-term and longer-term inflation and interest rate outlook. Duration has been the biggest factor moving the Asia investment-grade bond prices recently. ​
• We expect long-end US Treasury yields to move in a range as the market will continue to debate between the inflation and interest rate outlook and the inevitable increase in fiscal deficit. 

Asia High Yield Bonds

• Spreads of Asian high yield continue to remain at levels well below average amid subdued new supply. Although the ceasefire in the Middle East will stabilize sentiment in the near term, the impact to default and spread widening in the US high yield bonds due to the cracks in private credit and bank loans will remain as a risk factor. 

Emerging Market Debt

• Spreads remain tight, but investor demand remains strong. With hopes of the Strait of Hormuz reopening and oil prices back below USD100, there will be some reversal of capital and profit-taking from Latin America, as sentiment has been very one-sided in this region. 

Gold

• Although the gold price was corrected due to hedge fund de-grossing and sell-down in Gold by some Middle East countries due to the need for capital amid the middle of the war, Gold remains relatively resilient given the strengthening of the USD due to risk-off sentiment. ​
• Most central banks, including China, will continue to buy Gold to diversify away from US Treasuries. The acceleration of the “petro-yuan” trend will only increase demand for gold. Institutional investors’ gold positioning remains low and is likely to increase over time. 

Multi-Asset

• A multi-asset strategy offers lower volatility compared to traditional single-asset or balanced portfolios. However, the correlation between risk assets, such as equities, credits, and commodities, has recently increased dramatically. In an uncertain environment, income becomes an essential source of return for investors.

Source: Bloomberg, Data as of 31 March 2026.

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^{The views expressed are the views of Value Partners Hong Kong Limited only and are subject to change based on market and other conditions. The information provided does not constitute investment advice and it should not be relied on as such. All materials have been obtained from sources believed to be reliable as of the date of presentation, but their accuracy is not guaranteed. This material contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.}

^{Investors should note that investment involves risk. The price of units may go down as well as up and past performance is not indicative of future results. Investors should read the explanatory memorandum for details and risk factors in particular those associated with investment in emerging markets. Investors should seek advice from a financial adviser before making any investment. In the event that you choose not to do so, you should consider whether the investment selected is suitable for you.}

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