Multi-Asset Perspective – June 2025
18-06-2025
Global markets continue to reflect a mix of cautious optimism and evolving policy dynamics. In China and Hong Kong, trade tensions have eased, and liquidity remains ample, though macro data remain soft and sector rotation is likely. A-shares lag despite attractive valuations, particularly in tech.
Asia ex-Japan benefits from weak USD and capital inflows, notably into Korea and India. Korea’s pro-growth policy shift may narrow its valuation discount, while Southeast Asia’s rate cuts support a cyclical bottoming. Latin America leads EM ex-Asia on relatively low tariff exposure and structural reform, though geopolitical risks persist in Eastern Europe and the Middle East. Japan may pivot back to monetary easing, attracting renewed flows.
Asian bonds remain resilient—investment grade spreads are tight but still offer diversification; high-yield sentiment stays firm despite isolated credit events. Gold remains a volatility hedge, supported by central bank demand. Multi-asset strategies remain attractive amid elevated cross-asset correlations and rising demand for income.
Key indices | May 2025 performance | YTD performance | |
MSCI AC Asia ex-Japan Index (in USD) | 5.26% | 7.96% | |
MSCI China Index (in USD) | 2.74% | 13.13% | |
CSI 300 Index (in CNY) | 2.02% | -1.88% | |
Hang Seng Index (in HKD) | 5.91% | 18.02% | |
Taiwan Stock Exchange Index (in TWD) | 5.52% | -7.01% | |
MSCI Taiwan Index (USD) | 12.54% | 0.73% | |
MSCI AC ASEAN (USD) | 3.88% | 5.68% | |
JPM ACI China Total Return Index (in USD) | 0.19% | 2.86% | |
JPM Asia Credit Total Return Index (in USD) | 0.36% | 2.63% |
Source: J.P. Morgan, MSCI, Morningstar, Data as of 31 May 2025
China / Hong Kong Equities
- Trade tension is easing, although there will be a long back-and-forth negotiation between the US and China on the long list of trade disputes. The market’s focus on tariffs has been fading. As the US’s focus now is on growth to justify the huge budget deficit (close to 7% of GDP) and tax cuts, Trump would be cautious in escalating tariffs even after the 90-day truce.
- Recent US economic data showed signs of slowing but remained slightly better than expected. While recession risk is reduced due to the stop of the DOGE (Department of Government Efficiency) problem and the expansionary fiscal budget, inflation is worth watching closely to see if the recent deflationary trend is sustainable.
- The Fed is expected to be patent for longer while the market’s focus will be on the nomination of the next Fed chair and the continued independence of the Fed.
- Macroeconomic data in China remains weak and exports to the US have dropped significantly in May although other regions are resilient. China is likely to continue the wait-and-see approach and release stimulus gradually when needed.
- We expect the market to remain range-bounded and there will be rotation among the sectors that have higher growth visibility. Hong Kong equity market continues to be supported by the low HIBOR and strong Southbound flow. Liquidity remains ample even after several big IPOs which is a good sign that investors continue to diversify away from USD assets.
China A-Shares
- A-shares remain lagging. “A-H premium” is now at the lowest in 5 years. While the low HIBOR in Hong Kong is more favorable to HK-listed Chinese stocks, A-share’s valuation is getting attractive relatively.
- Investors will continue to focus on the sectors with higher growth visibility. Given the potential relaxation of some technology export restrictions by the US, the A-share tech sector would be worth the attention.
Asia ex-Japan Equities
- With the expectation of continuous USD weakness, there is a sign of the beginning of capital re-allocation back to Asia, led by inflows to India and Korea. We believe this trend will continue given investors’ trend of diversification away from the US.
- Valuation is diverged within Asia, with India and Taiwan above average and HK/China trading close to average. Korea and Southeast Asia are still below average.
- With Lee being elected as the new president of South Korea, the market is cheered by his shareholder-friendly and pro-growth policies. Lee proposed an enlarged fiscal budget to invest heavily in strategic industries. He is also expected to give more refined detail on the “Value-Up” program and potentially require the holding companies to cancel the treasury shares. The market expects that these policies will narrow the “Korea discount” over time.
- Southeast Asia like India and Indonesia although economic growth is slowing, their aggressive rate cut should support the bottoming of the economies. The weak USD and easy monetary policy backdrop are favorable to the markets.
Emerging Market ex-Asia Equities
- Emerging markets ex-Asia, particularly Latin America, have outperformed significantly as the impact of the US tariff on them is relatively mild and attracted investor capital from the US. Also, countries such as Argentina have good development in restructuring their currency and have gained IMF support.
- The lower USD also benefits EM’s equity markets. However, geopolitical risk remains heightened in Emerging Europe and the Middle East, with the latest attack between Israel and Iran. The market will remain volatile.
Japanese Equities
- BOJ is cautious about further rate hikes highlighting the uncertainty on the economic outlook and there is recent news that MoF is considering buying back the super-long Japanese government bonds as Japanese insurance companies are selling down their long-duration JGB exposure.
- Japan may potentially go back to the easy monetary environment again. With capital reallocation away from the US, Japan should be one of the beneficiaries as it is the market with the biggest breadth and depth in Asia.
Asia Investment Grade Bonds
- US Treasury yields have stabilized after a volatile period. With the Fed being patient, we believe the 10-year Treasury yield will remain range-bounded between 4.3 – 4.5% in the near term and the 30-year Treasury yield will remain around 5%. The upcoming Treasury auctions will be closely monitored.
- Asia investment grade bond spreads have gone back to historically tight levels. Since absolute yields are still attractive and Asia investment-grade bonds still serve as a diversification to equity risk, demand remains strong.
Asia High Yield Bonds
- Spreads have narrowed back to pre-liberalization day. Demand for Asian high-yield bonds remains strong. Lower USD has helped relieve some funding pressure for Southeast Asian companies.
- The recent perpetual coupon deferral by New World Development has caused some concern in the Hong Kong property sector but such an event should be a single event and does not spill to the overall sector.
Emerging Market Debt
- Geopolitical risk remains elevated. Spreads remain tight but the stabilization of the US Treasury yields helps, and lower USD is supportive to the region.
Gold
- Gold price is consolidating after breaking 3500. While the market has become less risk-averse, there is no sell-off in Gold given it is supported by lower USD and still the heightened volatility in the market.
- Central banks also continue to increase their gold holdings to diversify their FX reserves. Gold also remains a good hedge against any spike in geopolitical risk.
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.
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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 article has not been reviewed by the Securities and Futures Commission of Hong Kong. Issuer: Value Partners Hong Kong Limited.