The Multi-Asset Perspective – March 2021


Value sectors in Hong Kong/China equities are still attractive after several rally sessions. Rotation is more likely across sectors and styles than a switch-out.


Key indicesFeb 2021 performanceYTD
MSCI AC Asia Ex-Japan Index (in USD)1.3%5.4%
MSCI China Index (in USD)-1.0%6.3%
CSI 300 Index (in CNY)-0.3%3.7%
Hang Seng Index (in HKD)2.4%6.4%
Taiwan Stock Exchange Index (in TWD)5.4%8.3%
MSCI Taiwan Index (USD)4.6%11.4%
JPM ACI China Total Return Index (in USD)-0.2%-0.3%
JPM Asia Credit Total Return Index (in USD)0.3%-0.8%

Source: J.P. Morgan, MSCI, Morningstar, Data as of 26 February 2021


China / Hong Kong Equities

  • While the market has formed a consensus on a robust global economic recovery, rising inflation expectation follows. Both nominal and real yield in the long end of the U.S. Treasury curves have been trending at a rapid pace.
  • Concerns loom for the sectors that are driven by momentum. These stocks trade at high multiples and price in a long-term sales growth, which has translated into de-rating risk. However, as the value sectors are still attractive, rotation is likely across sectors and styles, rather than a switch-out from Hong Kong/China equities.


China A-Shares

  • Tighter liquidity and rising SHIBOR are reasons to be cautious on the China A-Share market. Investors are concerned about the momentum of the economic growth as the recovery seems to have peaked.
  • The Producer Power Index entered the positive terrain given a significant rally of commodity prices. This has helped the upstream companies regaining pricing power. On the other hand, momentum in the A-share market is fading as investors started to concern about valuations given the tighter policy stance and liquidity.


Asia ex-Japan Equities

  • Following a wave of significant upward earnings revision, it may have peaked in the near term and earnings revision has normalized. With the rising yield in the U.S., a technical reversal of the USD will pressure Asia.
  • As value rotation continues, Southeast Asia where value sectors take up a higher weighting, shall enjoy a large room for catch-up. Moreover, inflation is well under control, allowing a dovish monetary and fiscal stance among most Asian countries.


Emerging Market ex-Asia Equities

  • With the strong industrial metal and energy prices, Emerging Markets ex Asia benefited from the rotation to value.
  • However, with the U.S. Treasury yield curve steepening and widening of the Emerging Markets bond spreads, the equity market will be subjected to correction as investors become more cautious.


Japanese Equities

  • Japanese companies recorded high profits in Q4 2020 due to aggressive cost control during the pandemic. With the economy gradually returning to normal, corporate earnings will continue to surge.
  • Foreign capital is flowing to Japan while the domestic money has also started returning home. On the other hand, the Bank of Japan and the Government Pension Investment Fund reduced their ETF holdings, given the stronger momentum in the market.


Asia Investment Grade Bonds

  • The yield curves continue their steepening path given the better-than-expected economic recovery and stronger inflation expectation. Asia’s long-duration investment grade bonds suffer from the higher yield.  Outflow continues in the investment grade space.


Asia High Yield Bonds

  • The strong issuance, especially in the Chinese property sector, has pulled the Asian high yield spreads wider. However, strong corporate earnings continue to serve as the mainstay of the selected healthy high yield credit.


Emerging Market Debt

  • First-time outflow appeared in the EM bond market, given the increased risk aversion as the long-end yields have been rising rapidly. On the other hand, the robust industrial metal and energy prices continue to support emerging market debt.



  • With the V-shape economic recovery and higher inflation expectation, flows have been focused on industrial commodities and Gold has experienced one of the biggest outflow YTD. However, over the long term, Gold remains a good hedge against geopolitical uncertainties and would benefit from the easing fiscal policies.



  • Multi-asset offers a lower volatility level compared to a traditional single asset or a balanced portfolio. However, the correlation between risk-assets, such as equities, credits, and commodities, has increased dramatically recently. In an uncertain environment with low yields, income becomes an essential source of return for investors.


The author is Kelly Chung, our Senior Fund Manager.

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