The Multi-Asset Perspective – December


China’s economy, hardened thanks to resiliency in domestic demand and consumption reshoring to the mainland, is primed for a sustained recovery path into next year where the market forecasts a 20% earnings-per-share growth for the MSCI China Index constituents.

Key indicesNovember performanceYTD
MSCI Asia Ex-Japan Index (in USD)8.0%17.1%
MSCI China Index (in USD)2.7%25.4%
CSI 300 Index (in CNY)7.6%30.8%
Hang Seng Index (in HKD)9.4%-3.1%
Taiwan Stock Exchange Index (in TWD)9.4%18.2%
MSCI Taiwan Index (USD)10.0%27.6%
JPM ACI China Total Return Index (in USD)0.5%5.4%
JPM Asia Credit Total Return Index (in USD)1.3%5.7%

 Source: J.P. Morgan, MSCI, Morningstar, Data as of 30 November 2020


China / Hong Kong Equities

  • China’s macro indicators continue to be strong.  The factory activities expanded for the ninth straight month, with the official manufacturing Purchasing Managers’ Index coming in at 52.1 in November1. This is helped by the stabilizing demand and supply of manufacturing products. The services sector also registered a similar trajectory of expansion.
  • A more predictable Sino-U.S. relationship under the Biden Administration and a strong RMB strongly support the market. With the positive development in vaccines, investor sentiment has lifted despite a spike in COVID cases worldwide. The robust value rotation helps shore up Hong Kong stocks, which trade at relatively low valuations.


China A-Shares

  • A falling SHIBOR and the Medium-term Lending Facility injection provided support to the market while the economic recovery sustains its strength.
  • The trending industrial metal prices also added to the rally of the old economy sectors. With vigorous manufacturing activities, healthy export, and strong RMB, investors will continually favor the cyclical value sectors.


Asia ex-Japan Equities

  • Foreign capital started to flow back to Asia, with a significant inflow in November. Institutional money began to flow to Southeast Asia, given their lagging performance year to date and the weakening USD. However, with the positioning and sentiment getting extreme, a near-term pullback is due. But, it will be a good time to add to cyclical value in preparation for the 2021 positioning.
  • South Korea’s economy saw sustained improvements as the November rise in the Purchasing Managers’ Index marked the third consecutive expansion2. The expansion rate resets the fastest record in more than two and a half years. The officials launched another round of social distancing restrictions in the face of the third wave of COVID-19 transmissions. We continue to monitor the virus curbs and the potential impacts translated on domestic business operations.
  • The momentum of Taiwan’s export growth continued, marking five consecutive months of year-on-year growth. November exports post an increase of 12.0%3 from a year back. In addition to the digitization trend, year-end inventory stock-up contributed to the positive export performance. Tech-related categories continued to be the growth drivers. Moreover, in view of the sustained strength in export and moderate inflation, Taiwan’s government revised the full-year GDP growth of 2020 upward to the pre-COVID-19 level of 2.6%4 and projects the economy to grow 3.8% in 2021.


Emerging Market ex-Asia Equities

  • With global risk aversion receding and the strong industrial metal and energy prices, Emerging Markets ex Asia benefited from the rotation to value. With the USD on a structurally weakening trend, a rotation from developed markets to emerging markets shall continue.


Japanese Equities

  • Japanese equity has been surprisingly strong, scoring a new high since the meltdown in the 1990s. Foreign capital is flowing to Japan while the domestic money has also started returning home. This strong momentum with the overall lower global risk aversion will lend support to the market, although valuation is also extreme.


Asia Investment Grade Bonds

  • The yield curve should continue its steepening path given the positive development in vaccine and the better than expected economic recovery. Asia’s long-duration investment grade bonds will suffer from the higher yield. Credit spread has been very tight but is well supported by the strong demand and strong corporate earnings.


Asia High Yield Bonds

  • The stronger earnings sentiment in the region will continue to lend support to Asian high yield bonds. Also, given an eased global risk aversion, the declining CDS in Asia, such as China, Indonesia, and Korea, benefits the Asian high yield bond market.


Emerging Market Debt

  • Inflow has been strong to the emerging markets and to both equity and fixed income, as investors’ appetite has picked up significantly. The robust industrial metal and energy prices will also benefit emerging market debt, although the spread has already been very tight.



  • Gold has been a good hedge against uncertainties. The massive monetary easing and fiscal deficit prove to be adverse to the USD and reflationary in the longer term, supporting gold demand. However, with global investors less risk-averse, Gold will remain in a consolidation range in the near term.



  • 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.



  1. National Bureau of Statistics, People’s Republic of China, 30 November 2020
  2. IHS Markit, 30 November 2020
  3. Ministry of Finance, Republic of China (Taiwan), 7 December 2020
  4. Directorate-General of Budget Accounting And Statistics, Executive Yuan, Republic of China (Taiwan), 27 November 2020


The author is Kelly Chung, our Senior Fund Manager.

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