Multi-Asset Perspective – May 2023


Our investment director and head of Multi-Asset, Kelly Chung, shares her latest insights on different asset classes. The Hong Kong/China market has become range bound due to the unevenness of China’s economic recovery. Longer term, however, we expect consumption to continue to recover and increase momentum in the second half of the year.

In Asia, the weaker US dollar supported the market. But it remained range bound along with the US market as investors wait for more data and signals of a recession vs. rate cuts.

China / Hong Kong equities
  • Although the Fed raised interest rates by another 25bps in the May FOMC meeting as expected1, it delivered a hawkish pause message. Powell hinted that a pause in interest rate hikes is likely in the next June meeting, but the current inflation situation does not warrant a rate cut. However, the market has already widely expected a rate cut starting in September.
  • Meanwhile, the failure of a third bank in the US – First Republic Bank – signaled ongoing problems in the regional banks. Credit and money supply have contracted significantly since the banking woes. The softness in employment and consumption also signals that a recession is drawing nearer. Market sentiment continues to be pulled by these two forces (rate cut vs. recession) and will remain range bound.
  • The Hong Kong/China market has also been range bound. Despite the surge in tourism in China during the labor day holiday, the recovery in consumer spending was relatively slow. Also, after a strong rebound in China’s PMI since the reopening in Q1, April’s PMI has softened. While the Politburo meeting did not signal a massive stimulus, it reiterated its clear growth-supportive stance. Also, we expect consumption to continue to recover and increase momentum in the second half of the year.
China A-shares
  • Investors are worried about China’s slower-than-expected recovery, as it looks like it is losing steam in some areas, such as consumption and manufacturing. First quarter earnings have also been disappointing. As a result, investors have turned defensive, focusing only on sectors with clear upside catalysts, such as SOE reform.
Asia ex-Japan equities
  • The Asia market remains range bound along with the US market as investors wait for more data and signals of a recession vs. rate cuts.
  • The lower Treasury yields and the weaker US dollar supported the market. Some countries in the region have paused interest rate hikes as inflation has become more manageable, supporting market sentiment.
Emerging market ex-Asia equities
  • Stronger currencies in the region and the narrowing EM credit spread supported EM equities.
  • However, the market needs to be monitored, particularly the impact of a potential US recession on emerging markets.
Japanese equities
  • BOJ chief Ueda held the YCC policy unchanged in his latest BOJ meeting and signaled there would be a review of the policy, lasting for around 12-18 months. Also, he abandoned the forward guidance on interest rates.
  • However, the ultra-easy monetary policy remains with high uncertainty. Recent economic data is also weaker than expected. In addition, the country remains sensitive to global recession risks.
Asia investment grade bonds
  • Lower Treasury yields along the curve supported Asia investment grade bonds. Recent new issuance in Asia investment grade bonds is very active, and the demand is strong.
  • On the other hand, the overall investment grade bond spreads remain tight, and the risk of a recession may cause spread widening in the medium term.
Asia high yield bonds
  • After some aggressive tightening of credit spreads in Asia high yield bonds, especially in the China high yield space, investors have adopted a wait-and-see stance.
  • However, as the equity yield spread and high yield bond spread narrowed, investors have become more cautious on high yield credit.
Emerging market debt
  • The weaker US dollar and lower volatility in EM currencies supported emerging market bonds. However, investors have become more cautious toward EM bonds due to climbing recession risks.
  • Gold recently benefited from the lower US interest rate expectations and the weaker US dollar. Also, investors are again viewing the asset class as a safe haven, given the recent banking woes. Gold remains a good hedge against heightened geopolitical risks.
  • 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. Fed, 4 May 2023
April 2023 performance YTD performance
MSCI AC Asia ex-Japan Index (in USD)-2.08%2.17%
MSCI China Index (in USD)-5.16%-0.69%
CSI 300 Index (in CNY)-0.49%4.15%
Hang Seng Index (in HKD)-2.44%0.99%
Taiwan Stock Exchange Index (in TWD)-1.74%10.55%
MSCI Taiwan Index (USD)-4.25%9.88%
JPM ACI China Total Return Index (in USD)0.22%2.62%
JPM Asia Credit Total Return Index (in USD)0.89%3.44%

Source: J.P. Morgan, MSCI, Morningstar, Data as of 30 April 2023

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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.