Multi-Asset Perspective – December 2022


Our investment director and head of Multi-Asset, Kelly Chung, shares her latest insights on different asset classes. China’s equities market registered a strong and significant rebound in November, driven by a series of policy announcements to ease excessive anti-Covid measures and support the ailing property market. As the valuations are still at a discount to historical averages, the positive momentum will continue. 

China / Hong Kong equities
  • The Fed has communicated its intention to slow down the pace of rate hikes starting from the December FOMC meeting. However, the terminal rate and how long it will last remain to be an uncertainty. Services PMI and nonfarm payroll numbers in the US continue to be strong. Therefore, investors are still debating whether the US will go into recession next year. Our view is that while an earnings recession is unavoidable with the cumulative effect of the magnitude of rate hikes, a deep economic recession is unlikely. One thing that is clear is that the USD and Treasury yields have peaked as the rate hike goes into the next stage, which is supportive to risk appetite in the near term.
  • In China, the government has surprisingly moved quickly to relax Covid measures in many cities. The pace has been faster than anyone’s expectation. Also, many supportive measures have been announced in the property sector, aiming to reduce people’s bearishness toward properties. This clearly shows that the government has a strong interest in stimulating economic growth, which is the top priority. Investor sentiment is positive, and the buying has spread from hedge fund coverage to strong Southbound flows. Long-only foreign investors have not participated much in the recent rally yet, and with valuations still at a discount to historical averages, the positive momentum will continue. All eyes are now on the Central Economic Work Conference in mid-December.
  • In Hong Kong, there are also growing hopes that the border to reopen with China soon. Also, with the US dollar already peaked, the HK dollar has appreciated away from its upper band limit. This relaxes some of the financial tightness in the banking system and the elevated HIBOR. Hong Kong should continue to benefit from China’s reopening, and there will likely be less impact from the US market in the near term.
China A-shares
  • As China has speeded up in reopening and focused on stimulating economic growth, GDP growth for next year is expected to be at least 5%. The Sino-US relationship also seems to be stabilizing, with both sides having the incentive to maintain communications. These positive developments, together with a strong RMB, have supported investor sentiment.
  • As valuations go closer to average levels after the initial stage of the reopening rally, investors will shift their focus to EPS upgrades, given a faster economic recovery.
Asia ex-Japan equities
  • The softer US dollar and Treasury yields are positive to Asia ex-Japan equities. However, with some countries getting more expensive, such as India and Southeast Asia, flows are moving from Southeast Asia to North Asia. Also, with softer commodity prices, earnings of the energy and material sectors are expected to be negative next year, which have triggered some profit-taking in these sectors, especially in Southeast Asia.
  • On the other hand, with the Fed rate hike going into a slower phase and a stabilizing Sino-US relationship, Taiwan has recovered from distressed valuations.
Emerging market ex-Asia equities
  • The softer US dollar and Treasury yields are positive to emerging market equities. However, with weaker oil prices amid recession concerns, investors’ sentiment has turned a bit cautious.
Japanese equities
  • The Japanese equities market is expected to be negatively affected by recession risks, as the economy is sensitive to global trade. We are seeing signs of exports deteriorating amid the weakening global demand. Moreover, as the Japanese yen gets stronger, given the softer US dollar, and as inflation picks up in Japan, putting pressure on the BOJ to relax on the yield curve control, the stronger currency will become a headwind to the export sector.
  • On the other hand, domestic sectors will continue to benefit from Japan’s reopening, although the current pace of recovery is slower than expected.
Asia investment grade bonds
  • With the faster-than-expected reopening pace in China, momentum in Asian credit has picked up. Credit spreads have tightened, and with the downward shift in the US Treasury yield curve, there is growing interest in Asian credit.
  • The positive momentum will continue as currently, the spread in Asia credit is still more attractive than in developed markets.
Asia high yield bonds
  • Sentiment toward Asia high yield bonds has picked up quickly, especially in the Chinese high yield space, given the 180-degree change in sentiment in the property sector on the back of the supportive policies, and in the consumption and industrial sectors given the faster pace of reopening.
  • Credit spreads in other Asia ex-China high yield bonds have also tightened due to the improvement in the liquidity and sentiment in the space.
Emerging market debt
  • The softer US dollar and downward shift in the US Treasury yield curve are positive for emerging market bonds. CDS in countries such as Mexico and Brazil continue to fall, which is supportive.
  • The demand for gold remains weak as the yields in government and investment grade bonds are much more attractive.
  • However, with the US dollar softening, the gold price has also founded a floor and started to rebound. Gold remains a good hedge against heightened geopolitical risks and stagflation concerns.
  • Multi-asset 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 with low yields, income becomes an essential source of return for investors.


Year-to-date (ending 30 November 2022)November 2022 performance
MSCI AC Asia ex-Japan Index (in USD)-19.52%18.81%
MSCI China Index (in USD)-25.79%29.71%
CSI 300 Index (in CNY)-20.34%9.83%
Hang Seng Index (in HKD)-17.80%26.79%
Taiwan Stock Exchange Index (in TWD)-14.55%14.91%
MSCI Taiwan Index (USD)-25.71%22.21%
JPM ACI China Total Return Index (in USD)-12.66%5.70%
JPM Asia Credit Total Return Index (in USD)-12.48%5.47%

Source: J.P. Morgan, MSCI, Morningstar, Data as of 30 November 2022

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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.

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This commentary has not been reviewed by the Securities and Futures Commission of Hong Kong. Issuer: Value Partners Hong Kong Limited.