Multi-Asset Perspective – September 2022


Our investment director and head of Multi-Asset, Kelly Chung, shares her latest insights on different asset classes. Investor sentiment toward the Greater China market remained muted as macroeconomic conditions remained soft. However, with their attractive valuations, she sees a higher upside than downside, especially since earnings for most companies have bottomed.

China / Hong Kong equities

US equities corrected following a phase of a bear market rally, just after the Fed said at the Jackson Hole meeting that it was committed to slowing down inflation to its 2% target and would continue its rate hike path1. Hopes of a Fed pivot have vanished, given the Fed’s hawkish stance. The Treasury curve was immediately repriced, with the whole yield curve shifting up again. In addition, Europe is facing an energy crisis. As a result, global sentiment has turned much weaker.

In China, lockdowns reappeared in some cities due to the surge in Covid cases. Moreover, economic data remains weak, and the recovery path in consumption and property remains sluggish. The savings rate in China has surged to about 35% of 2019 GDP as consumers have become more cautious about spending amid the weak sentiment2. With the strong US dollar, the renminbi continues to depreciate. Although this indicates that the magnitude of monetary stimulus will be limited, the government is still looking to bring forward more fiscal stimulus. Moreover, as the 20th CPC party congress will be held at an earlier than expected date (16 October), some policies are expected to be rolled out to revive the economy.

Currently, sentiment remains fragile towards China/Hong Kong equities. However, with their attractive valuations, we see a higher upside than downside, especially since earnings for most companies have bottomed. Also, Hong Kong is progressing on reopening, axing hotel quarantine. The domestic sector, which remains cheap, is likely to benefit.

China A-shares

Concerns remain over China’s economic recovery, given the still slumping property sector and delayed implementation of infrastructure projects from the already issued special purpose bonds. Currently, local governments are focused on dealing with the mortgage issue of unfinished developments and the poor weather conditions. In addition, the recently heightened political tensions – between China and Taiwan and between China and the US – have further dampened investor sentiment. Investors are taking a wait-and-see approach to A-shares as the market is moving sideways. Sector performance will likely continue to diverge as investors only want to focus on the growth sectors with high earnings visibility.

Asia ex-Japan equities

Asia’s performance has been diverging since the second quarter as flows continued to shift from China and Taiwan to India and the ASEAN. Although inflation remains elevated in India and ASEAN countries, there are signs of peaking, and earnings momentum is strong in this region. However, the strong US dollar and rising interest rates will pressure those countries with weaker current accounts, such as Thailand and the Philippines. Global demand for consumer electronics and semiconductors has been slowing down significantly, putting pressure on the export growth of Taiwan. We believe Asian equities will remain range-bound in the near term.

Emerging market ex-Asia equities

Fund flows into emerging markets ex-Asia countries have become stronger due to recovering agricultural prices and strong earnings momentum, especially in Latin America. However, high inflation and the strong US dollar remain the pain points for emerging market equities.

Japanese equities

The Japanese equities market is expected to be negatively affected by recession risks, as the economy is sensitive to global trades. We are seeing signs of exports deteriorating amid the weakening global demand. On the other hand, company earnings continue to see upward revisions and have also been supported by the weaker Japanese yen. In addition, with Japan gradually reopening, selective domestic sectors are showing signs of bottoming.

Asia investment grade bonds

Although Treasury yields moved up after the Jackson Hole meeting, the higher quality Asia investment grade bonds yielding around 4.5-6% have become attractive, gathering stronger demand. As a result, spreads in Asia investment grade bonds continue to tighten. Therefore, focusing on the high-quality spectrum and credit selection is crucial while maintaining a lower duration stance.

Asia high yield bonds

Investor sentiment toward China high yield bonds has improved, especially in the property sector. The government provided some support to the Chinese property sector, such as allowing selective developers to issue onshore bonds. However, investors remain selective as those issuers with heavy near-term maturities and weaker financing prospects remain weak. Outside China, inflows are returning to the Indonesia and India bonds after the market correction, given their attractive valuations.

Emerging market debt

The upward shift in the US yield curve has caused some concerns over emerging market bonds. Latin America has become more favorable over emerging Europe as their currencies remain resilient and earnings momentum is strong.


Demand for gold remains weak given the more attractive yields in government and investment grade bonds. The strong US dollar has also put pressure on the gold price. However, gold remains a good hedge amid the heightened geopolitical risk and stagflation concerns, especially in Europe.


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. Jackson Hole Economic Symposium, 26 Aug 2022
  2. Bloomberg, 31 Aug 2022
Key indicesYear-to-date (ending 31 August 2022)August 2022 performance
MSCI AC Asia ex-Japan Index (in USD)-17.30%-0.01%
MSCI China Index (in USD)-19.51%0.22%
CSI 300 Index (in CNY)-15.79%-1.96%
Hang Seng Index (in HKD)-12.47%-0.78%
Taiwan Stock Exchange Index (in TWD)-13.54%1.19%
MSCI Taiwan Index (USD)-23.87%-1.30%
JPM ACI China Total Return Index (in USD)-11.29%0.17%
JPM Asia Credit Total Return Index (in USD)-10.73%-0.25%

Source: J.P. Morgan, MSCI, Morningstar, Data as of 31 August 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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This commentary has not been reviewed by the Securities and Futures Commission of Hong Kong. Issuer: Value Partners Hong Kong Limited.