Multi-Asset Perspective – June 2022


Investor sentiment toward Greater China equities improved on the back of China’s supportive policies and economic resumption.

However, inflation has started to hurt other Asian markets, and the strengthening US dollar does not bode well for emerging markets.

Key indicesYear-to-date (ending 31 May 2022)May 2022 performance
MSCI AC Asia ex-Japan Index (in USD)-12.34%0.46%
MSCI China Index (in USD)-16.73%1.18%
CSI 300 Index (in CNY)-16.95%2.08%
Hang Seng Index (in HKD)-7.59%2.15%
Taiwan Stock Exchange Index (in TWD)-7.49%1.31%
MSCI Taiwan Index (USD)-12.69%3.62%
JPM ACI China Total Return Index (in USD)-8.64%-0.52%
JPM Asia Credit Total Return Index (in USD)-8.65%-0.29%

Source: J.P. Morgan, MSCI, Morningstar, Data as of 31 May 2021

China / Hong Kong Equities

The US 10-year Treasury yield has gone back to above 3%1, and the US dollar turned stronger as some Fed members commented that they couldn’t see any reason to stop hiking interest rates in September. Together with the World Bank downgrading global GDP growth this year to 2.9%2 amid stagflation concerns, developed markets showed some weakness after a short period of a bear market rebound. However, the renminbi stabilized with no further depreciation, even as the US dollar turned stronger against most other currencies. China’s economic data for April and May was better than initially feared. First quarter earnings for internet companies also beat expectations. China’s government also released supportive signals to the internet sector. As a result, investor sentiment improved. In addition, as most cities in China have reopened and most economic activities are resuming, foreign investors also turned cautiously optimistic. China / Hong Kong equities are gradually recovering from their bottom, and given their attractive valuations, further re-rating and inflows should continue.

China A-Shares

China is counter-cyclical against the west, and A-shares are less impacted by global markets. Starting from May, the government has implemented more easing policies that have been pledged, including tax cuts, consumption stimulus, increasing credit supply, renewable energy push, and others. It is very clear that stimulating demand and economic recovery are the priorities of the government. Earnings downgrades have also bottomed. However, the weak property sector is still dragging economic recovery and actual improvement in consumption still needs time to be seen.

Asia ex-Japan Equities

Inflation has started to hurt some countries in Asia, such as Korea and India, where their central banks are expected to continue hiking interest rates to combat inflation. India particularly suffers from high food and energy inflation, causing consumer spending to slow. The strong US dollar has also started to affect some Southeast Asia countries. On the other hand, the improving sentiment in China’s recovery and its reopening has provided some support to Taiwan’s manufacturing sector.

Emerging Market ex-Asia Equities

The strong US dollar and recession risk in the US do not bode well for emerging market equities. The food inflation problem is hurting some emerging markets, with social instability becoming a major concern. While recession risk in the US caused industrial commodities to correct, the oil price is the only commodity that continues going up given the tight supply and decreasing inventory. Selective oil-producing emerging markets are still well supported as a result.

Japanese Equities

With Japan being sensitive to global trades and as recession risks loom, Japanese equities will likely be affected. However, we believe it will outperform the US as its export sectors benefit from its weak currency. That said, as Japan’s inflation finally hit above the 2% target3, there are concerns that the Bank of Japan may shift its policy stance on yield curve control soon as the Japanese yen continues to break the 20-year low.

Asia Investment Grade Bonds

As the market has already priced in the most hawkish scenario from the Fed, we expect the US 10-year Treasury yield to hover around 3%. With Asia countries’ CDS falling and a more positive outlook on China, credit spreads have started to stabilize or even slightly narrow. Some quality investment grade bonds have become more attractive, yielding around 4.5-6%.

Asia High Yield Bonds

With sentiment in China improving, there is some buying in Asian high yield bonds. However, as some China property bonds continue to face downgrades and negative outlooks, the China property sector remains weak. Separately, there is also some selling in Indian high yield bonds, given concerns over high inflation.

Emerging Market Debt

The strong US dollar and recession risk remain the major concerns for emerging market bond investors. CDS in some weaker emerging market countries are also rising. However, some emerging markets are benefiting from elevated energy and agricultural prices.


The strong US dollar and rising Treasury yields do not bode well for gold. Historically, however, gold is the best performing asset class under stagflation conditions. As the market has started to be concerned about stagflation, gold will likely be considered one of the best hedges in such an environment.


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. Bloomberg terminal, 20 June 2022
  2. World Bank, 7 June 2022
  3. Ministry of Public Management Japan, 26 May 2022

The author is Kelly Chung, our investment director and head of Multi-Asset.

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