The Multi-asset Perspective – February 2021


Valuations indeed heightened after the rally post pandemic. As we factor in China’s continued and resilient macro recovery, ample liquidity backdrop and solid earnings profile relative to other Asian markets, we believe a cautiously optimistic view on Greater China equity is justifiable.


Key indicesJanuary 2021 performanceYTD
MSCI Asia Ex-Japan Index (in USD)4.1%4.1%
MSCI China Index (in USD)7.4%7.4%
CSI 300 Index (in CNY)4.0%4.0%
Hang Seng Index (in HKD)3.9%3.9%
Taiwan Stock Exchange Index (in TWD)2.8%2.8%
MSCI Taiwan Index (USD)6.5%6.5%
JPM ACI China Total Return Index (in USD)-0.1%-0.1%
JPM Asia Credit Total Return Index (in USD)0.0%0.0%

Source: J.P. Morgan, MSCI, Morningstar, Data as of 29 January 2021


China / Hong Kong Equities

  • Strong onshore mutual fund issuance has supported the market rally, although liquidity remains tight. Strong southbound flows have also caused the Hong Kong market to play a catch-up rally given the relatively low valuation. China’s economic growth momentum will remain strong, which translates into strong corporate earnings that will continue to back the stock market rally.
  • Towards the end-January, investors were wary of the Chinese central bank taking a more neutral stance versus a very simulative stance before, resulting in a pullback. We believe China’s policy priority is set to ensure financial stability while avoiding bubbles and follows the central bank’s promise in December of no sudden interest rate hike. Although valuations heightened after the resilient rally post pandemic, we remain cautiously optimistic about the Greater China equities, factoring in China’s continued and resilient macro recovery, ample liquidity backdrop and solid earnings profile relative to other markets in the region.


China A-Shares

  • Tighter liquidity and rising SHIBOR are reasons to be cautious on the China A-Share market. However, the People’s Bank of China is unlikely to tighten too much as they are testing the right level of liquidity to inject into the market, given the strong economic momentum. Strong onshore mutual fund issuance provides support to the market.  However, due to the resurgence of COVID-cases in some cities and the encouragement of staying in the same place for the Chinese New Year, consumption spending would be impacted during this holiday season.


Asia ex-Japan Equities

  • Foreign capital continues to flow back to Asia, with significant inflow continues YTD. With the USD continues its weakening trend, capital will continue to flow to Asia. Strong earnings sentiment is favorable for Asia with EPS growth expected to be over 20% this year. The cyclical value rotation happening in the U.S. and Europe have not yet as clear in Asia yet, giving room to catch up in the cyclical value sectors in Asia.  Fiscal spending is getting more favorable to support the economies.


Emerging Market ex-Asia Equities

  • With global risk appetite picking up 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. The stronger JPY should also be monitored closely.


Asia Investment Grade Bonds

  • The yield curve should continue its steepening path given the better than expected economic recovery and stronger inflation expectation. 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

  • With the strong issuance, especially in the Chinese property sector, the Asian high yield spread has widened. However, the strong corporate earnings will continue to support the selected healthy high yield credit.


Emerging Market Debt

  • The pickup in investor appetite has propelled capital to flow to the emerging markets and to both equities and fixed income. 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.


The author is Kelly Chung, our Senior Fund Manager.

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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.

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.