The Multi-Asset Perspective: August 2020


Investors continue to take solace in the positive surprises in the macro data, which has printed with recovery signs since May.  points to China’s indicators, which suggest apparent economic recovery and sentiment improvements.


Key indicesJuly performanceYTD performance
MSCI Asia Ex-Japan Index (in USD)+8.5%+3.4%
MSCI China Index (in USD)+9.4%+12.7%
CSI 300 Index (in CNH)+15.1%+16.4%
Hang Seng Index (in HKD)+1.5%-10.6%
Taiwan Stock Exchange Capitalization Weighted Stock Index (in TWD)+10.8%+8.2%
JPM ACI China Total Return Index (in USD)+1.7%+5.0%
JPM Asia Credit Total Return Index (in USD)+2.2%+4.5%

Source: J.P. Morgan, MSCI, Morningstar, Data as of 31 July 2020

China / Hong Kong Equities

  • Investors continue to take solace in the positive surprises in the macroeconomic data, which printed with sustained signs of recovery since May. In particular, China’s macro indicators suggest that the nation enjoys apparent economic recovery and improvements in sentiment.
  • Earnings among Greater China corporates turned positive, as reflected in the better-than-expected quarterly results. Increasingly, companies receive upgraded earnings forecasts from analysts for the rest of 2020 and the next year.
  • With valuation not too demanding, risk-seeking capital started to return to the Hong Kong equity market, where sees climbing transaction volume supported by the Southbound flow in the Stock Connect scheme.
  • On the other hand, the escalating Sino-U.S. tension is the most significant risk that weighs on market sentiments.

China A-Shares

  • While the macro recovery is on track and the virus well under control, the government is taking a moderate approach in supporting the economy with the right amount of stimulus. Valuation, measured by the price-to-book ratio, becomes slightly expensive.
  • Over to risk factors, investors should note that the escalating Sino-U.S. tensions would hinder overall market sentiments.

Asia ex-Japan Equities

  • The weak U.S. dollar trade has become a consensus.  With inflation expectation rising amid a better economic outlook and the supportive COVID-19 vaccine progress, the yield curve began to steepen slightly. This may hinder the capital flow to Asia, particularly Southeast Asia, as the U.S. dollar may reverse in the short term.
  • Over the longer horizon, though, we expect the greenback to remain weak as the U.S. Federal Reserve will remain dovish for much longer. Such a backdrop will continue to support Asia ex-Japan equities.

Emerging Market ex-Asia Equities

  • After the rally in July, EM ex-Asia equities may set back as the weakening trade of the U.S. dollar saw signs to reverse. However, healthy and resilient agriculture and base metal prices under a strong global recovery expectation will continue to support the EM ex-Asia market, which is particularly sensitive to commodity prices.

Japanese Equities

  • In Japan, the lack of improvement in the economy and fundamentals is worrying. However, earnings sentiment has stabilized with low expectations.
  • Domestically, the virus cases seem to have passed the peak, and the resumption of economic activities will be closely watched.

Asia Investment Grade Bonds

  • The spread between the Asian and U.S. investment grade issues continues to tighten, given a strong yield-searching demand amid the ample market liquidity.
  • With the yield curve starting to steepen with rising inflation expectation, a near term correction is likely after such a strong rally.

Asia High Yield Bonds

  • The credit spread in Asian high yield issues continues to tighten, given stronger earnings sentiment in the region. However, with the yield curve starting to steepen with rising inflation expectation, a near-term correction is likely after such a strong rally.

Emerging Market Debt

  • The strong recovery in agriculture and base metal prices continues to lend support to the credit spread tightening in EM debt.


  • Gold has been a good hedge against uncertainties. The massive monetary easing and fiscal deficit will be adverse to the U.S. dollar and reflationary in the longer term, which supports gold demand.
  • With risk appetite picking up and yield curve steepening, a correction in the near term is unavoidable but healthy after such a skewed sentiment and positioning.


  • 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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