Multi-Asset Perspective – January 2023


Our investment director and head of Multi-Asset, Kelly Chung, shares her latest insights on different asset classes. Global investors are quickly re-accessing the China market, and the country’s reopening is becoming the number one theme for 2023. Although the valuations of China / Hong Kong equities are not as extremely cheap as before, they are still below the historical average, and with the reopening in progress, there will likely be increasingly more earnings upgrades.

China / Hong Kong equities
  • China’s reopening of its border was much earlier than expected. This surprise move has caused investors to quickly re-access the economy and the market, with the country’s reopening becoming the number one theme for 2023.
  • While the rest of the world is facing recession risks, China is in a different cycle. The government has accelerated supportive measures for the property sector, aiming to regain people’s confidence. Also, the local government debt quota has increased significantly, and the fiscal budget has risen to 3% of GDP. Together with other measures, this clearly shows that the government has a strong interest in stimulating economic growth, which is its top priority.
  • Investor sentiment is positive, and the buying has spread from hedge funds to strong Southbound flows. Long-only foreign investors have just started to participate since January, with most still underweighting China/Hong Kong equities. Although valuations are not as extremely cheap as before, they are still below the historical average, and with the reopening in progress, there will likely be increasingly more earnings upgrades. However, after a good run, the market will focus more on fundamentals as some sectors have been running ahead.
  • In Hong Kong, a full border reopening is finally in place. Also, with the US dollar weakening, the Hong Kong 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
  • The reopening rally in China A-shares is lagging behind their offshore peers as valuations were not as extreme as China/Hong Kong equities. Foreign investor participation has been focused on the offshore market. Domestic investor sentiment is positive, albeit with a cautious stance, as economic activities have not significantly picked up yet. The recent rising SHIBOR and tighter financial condition added to the cautiousness.
  • However, the stronger renminbi will provide support to the sentiment. As reopening gathering pace after the Chinese New Year, the positive momentum will likely continue.
Asia ex-Japan equities
  • The softer US dollar and Treasury yields are positive to Asia ex-Japan equities. That said, as investors focus on China’s reopening, flows are moving from Southeast Asia to North Asia. In addition, the softer commodity prices have triggered profit-taking in the energy and material sectors, especially in Indonesia, and flows have been very targeted to the China reopening beneficiaries.
  • On the other hand, with economic growth in the US deteriorating, markets that are sensitive to global trade, such as Korea, Taiwan, and Singapore, will be under pressure.
Emerging market ex-Asia equities
  • The softer US dollar and Treasury yields are positive to emerging market equities. Foreign investors are starting to narrow the underweight in emerging markets with reallocation from the US.
Japanese equities
  • Although the market understood that the BOJ was under pressure to keep the yield curve control at the tight range of 0-0.25%, the timing of the widening of the band to 0-0.5% caught most investors by surprise1. It was done at the end of the year and with the BOJ governor Kuroda denying his intention of staying as governor beyond his current term, which will end in April.
  • The Japanese yen will likely continue to strengthen as the market expects the central bank to further widen the band in April. The stronger currency will likely hurt the export sector. Also, inflation and wage pressure are picking up in Japan. The tighter liquidity will be negative to the market, except for banks.
Asia investment grade bonds
  • With the faster-than-expected border reopening in China, momentum in Asian credit has picked up.
  • However, following the rally, credit spreads have tightened to a narrow differential vs. US investment grade bonds. Also, with risk appetite picking up, investors are shifting the focus more to Asia high yield bonds.
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 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. Also, with duration risk becoming less of a concern due to the peaking US Treasury yields, investors are extending their appetite to longer-dated bonds in the search for more upside.
Emerging market debt
  • The softer US dollar and downward shift in the US Treasury yield curve are positive for emerging market bonds.
  • However, rising CDS in countries such as Mexico and Brazil are some warning signs.
  • Gold has had a good run as the US dollar continues to weaken. However, with the Fed still in a rising rate cycle, further upside may be limited at this point.
  • On the other hand, 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.


  1. Bank of Japan, 20 Dec 2022
Year-to-date (ending 31 December 2022)December 2022 performance
MSCI AC Asia ex-Japan Index (in USD)-19.67%-0.19%
MSCI China Index (in USD)-21.93%5.20%
CSI 300 Index (in CNY)-19.84%0.64%
Hang Seng Index (in HKD)-12.54%6.39%
Taiwan Stock Exchange Index (in TWD)-18.68%-4.83%
MSCI Taiwan Index (USD)-29.76%-5.46%
JPM ACI China Total Return Index (in USD)-10.45%2.53%
JPM Asia Credit Total Return Index (in USD)-11.02%1.67%

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