The Multi-Asset Perspective: April 2020



In this edition of the Multi-Asset Perspective, our Senior Fund Manager Kelly Chung takes note of what comes next after panic sell down while volatility persists.


China/ Hong Kong Equities

After panic selling during late March, the market recovered based on an expectation of new infection cases and death toll to peak first in Europe then in the U.S. As policymakers around the world, esp. the U.S., are doing “whatever it takes” to support their economies, the most panic moment in the market seems to have passed for now. The concern turns to real economic impacts being uncertain and how much they are being underestimated. Investors should note downside risk could surface after this relief rally. Meanwhile, resumption of business activities in China after weeks of lockdown is progressing well while impacts on demand from a global recession may have been underestimated, which likely leads to more downgrade in earnings. Companies have been refrained from providing better clarity for this year due to the highly uncertain economic environment. Therefore, visibility remains low and the market will continue to be volatile in Q2 although valuation is attractive.


China A-Shares

China A-shares has been more resilient in this round of downturn as the country is ahead of the rest of the world in terms of resuming the economic activities from the Covid-19. However, export and trading related activities would still be severely hurt by the global recession. Such impact has yet been fully reflected in the valuation of China A-shares as most sectors are at or slightly above multiples average. Domestic focused sectors are preferred compared to those that are sensitive to external demand.


Asia ex-Japan Equities

Policymakers in Asia are aggressively easing the policies and providing relief packages to combat the impacts from the lockdown. Outflow continues from the region. Southeast Asian countries are more vulnerable from the global recession. We prefer North Asia to Southeast Asia due to the former’s attractive valuation and healthier surplus. Under low visibility on company earnings, volatility is expected to continue while market direction of the region is also influenced by the USD movement.


Emerging Market ex-Asia Equities

Emerging markets ex-Asia is sensitive to prices of oil and other commodities.  Emerging Europe and Latin America will suffer from a sharp slowdown in Europe and the U.S.


Japanese Equities

Japan joined to close down most parts of the country in containing the virus. Tokyo Olympics is now officially delayed.  However, the full economic impact has not been fully reflected. With the already weakened consumption, the economy and the companies would remain fragile, despite the enlarged asset purchase program’s attempt to support the market. The recovery road for Japan will be a farther goal to reach.


Asia Investment Grade Bonds

Sentiment on IG bonds has been stabilized after the Fed’s announcement of directly buying U.S. IG corporate bonds. Asia’s IG bonds also benefited from the improved sentiment. However, with a global recession, there would be more fallen angels falling from BBB to non-IG rating. If happens, spreads could widen again However, the Fed may step in to do “whatever it takes” to support the credit market.


Asia High Yield Bonds

While the U.S. HY sector hit by oil price crash and the global recession risk, Asia HY bonds also suffered from the severely negative investor sentiment as credit spreads are widening on a relative basis. On the other hand, Asia HY bonds enjoy stronger fundamentals without much exposure to energy. They are a better place to be with yield reaching 10%+.


Emerging Market Debt

Weak oil and commodity prices have caused credit spread to significantly widen as Emerging Market ex-Asia is sensitive to external demand.



Gold has been a good hedge against uncertainties. The massive monetary easing and fiscal deficit will be USD negative and reflationary in the longer term which are favorable to Gold.



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



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.

Investors should note that investment involves risk. The price of units may go down as well as up and past performance is not indicative of future results. Investors should read the explanatory memorandum for details and risk factors in particular those associated with investment in emerging markets. Investors should seek advice from a financial adviser before making any investment. In the event that you choose not to do so, you should consider whether the investment selected is suitable for you.

This commentary has not been reviewed by the Securities and Futures Commission of Hong Kong. Issuer: Value Partners Hong Kong Limited.