The Multi-Asset Perspective: December 2019


Value Partners-China Funds

In this edition of the Multi-Asset Perspective, our Senior Fund Manager Kelly Chung said as U.S.-China trade negotiations is moving towards a positive direction and central banks remain accommodative, global risk aversion has receded. 

China / Hong Kong Equities

Investor sentiment is lifted as a Phase 1 trade deal between the U.S. and China is highly likely to be signed before year-end. RMB is stabilizing and further supports the outlook of corporate profit recovery next year. With the Fed remains accommodative and with its balance sheet expanding again, global risk aversion has receded. Valuation is attractive in Hong Kong/ China, however, the economic slowdown in Hong Kong and the continued social unrest remain impediments for further rally in the equity market.

China A-shares

With the interest rates continue on a downward trend, the ample liquidity will continue to support the market although another large scale stimulus seems to be unlikely before the year-end with the trade talks progressing well. Also, towards the year end and with the Chinese New Year comes earlier next year, many investors are locking in profits and reducing positions so some technical correction is possible.

Asia ex-Japan Equities

With the Fed remains accommodative, the USD has peaked and will continue to weaken gradually. Strengthening Asian currencies are very supportive to the equity market. However, the sluggish economic growth still hinders corporate earnings recovery as downward earnings revision continues. Bottoming manufacturing activities are a prerequisite for a sustainable rally in the equity market.

Emerging Market ex-Asia Equities

Emerging markets ex-Asia have plenty of room to cut interest rates given the manageable inflation, although valuation has become less favorable.

Japanese Equities

Valuation in Japan is the most attractive within Asia. We see stabilizing earnings revisions after a decline in the last few months. Consumption seems to be holding up well this time despite the consumption tax hike on Oct. 1 compared to the tax increase last time in 2014. However, short-term momentum in the market is fading after a significant rally since September.

Asia Investment Grade Bonds

The U.S. Treasury yield curve has steepened from a flat one as economic data came in better than expected and investors are confident that a recession would be avoided in the near term. Also, with inflation expectation slightly improves, investment grade bonds will be hurt from a duration perspective. In addition, improving risk aversion makes investors shifting from investment grade to high yield bonds.

Asia High Yield Bonds

Easier policy and financing conditions in the Chinese property sector helps lift the investor sentiment on Asian high yield bonds. The trend of rotation from investment grade to high yield should continue.

Emerging Market Debt

The accommodative Fed provides support to emerging market debt. However, the recent rising credit default swaps (CDS) in some emerging markets and downward earnings revisions hinder investor confidence.


Gold is a good hedge amid political uncertainties. Also, with global central banks on an easing mode, investors would put money into gold rather than negative-yielding bonds. However, with yield curves steepening while global risk aversion recedes, technically it is not favorable for gold in the near term.


Multi-asset offers lower volatility compared to a single traditional asset or a balanced portfolio. However, risky assets such as equities, credits and commodities have become more correlated with each other amid the current market environment. Additional asset classes are therefore needed for better diversification. In an uncertain environment with lower yields, income becomes an important source of returns 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.