The Multi-Asset Perspective – January


China continues to be a favored destination for global investors, following its effective virus control, vigorous manufacturing activities and healthy export performance. In addition, the strong RMB against the greenback shall continue to draw capital inflow to the market, especially the cyclical value sectors.


Key indicesDecember 2020 performanceYTD
MSCI Asia Ex-Japan Index (in USD)6.8%25.0%
MSCI China Index (in USD)2.8%28.9%
CSI 300 Index (in CNY)5.8%38.4%
Hang Seng Index (in HKD)3.4%0.2%
Taiwan Stock Exchange Index (in TWD)7.5%27.1%
MSCI Taiwan Index (USD)10.5%41.0%
JPM ACI China Total Return Index (in USD)0.7%6.1%
JPM Asia Credit Total Return Index (in USD)0.6%6.3%

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


China / Hong Kong Equities

  • China’s macro indicators continue to stay strong. After the deepest contraction of GDP in history in the first quarter, the country’s YoY economic growth returned to the positive territory in the third and fourth quarter, up 4.9% and 6.5% respectively1. The quick turnaround was supported by domestic-led economic activities. The GDP concluded 2020 at 2.3%.
  • A more predictable Sino-U.S. relationship under the Biden Administration and a strong RMB solidly support the market. Investors have already looked forward to a strong global economic recovery in 2021 with the help of the vaccines. China will continue to benefit from the strong external and internal demand. The continuous value rotation helps shore up Hong Kong stocks, which trade at relatively low valuations.


China A-Shares

  • The upward earnings revision has continue to reach a historical high.  The earnings-per-share growth is expected to be strong in 2021. The trending industrial metal prices also added to the rally of the old economy sectors. With vigorous manufacturing activities, healthy export performance, and strong RMB, investors will continually favor the cyclical value sectors.


Asia ex-Japan Equities

  • Foreign capital continues to flow back to Asia, with a significant inflow starting from Q4 2020, although the overall 2020 was still net outflow. With the USD continues its weakening trend, capital will continue to flow to Asia. Southeast Asia, given their lagging performance in 2020, had already outperformed in Q4. With the value rotation and strong global economic recovery in sight, Southeast Asia will continue to benefit. However, with the positioning and sentiment getting extreme, a near-term pullback is due.
  • Throughout the year, Taiwan’s economy and equity market braved the challenges, with its resiliency outstanding among other markets. Effective handling of the virus and a favorable surge in digitalization demand all contributed to the strong equity rally. Taiwan has been the major beneficiary of the ongoing 5G upgrade and the robust demand for stay-home electronic equipment amid the lockdown throughout most of 2020. In 4Q20, both electronic components and information technology products export refreshed their respective previous highs. The full-year export volume saw a 4.9% year-on-year growth ending at US$3.4 trillion2, more than offsetting the weakness in non-tech export amid the COVID-caused lockdown abroad. Riding on a domestic consumption recovery and positive export growth, the officials provided an optimistic GDP growth target of 3.8% for 20213.
  • Similarly, South Korea is also a beneficiary of the demand created by the accelerated digitalization trend, especially for DRAM memory chips – a major commercial product in Korea’s chip export. Such backdrop supported equity market performance with the MSCI Korea Index ending the year with a 45.2% rise4. Manufacturing activities are expected to continue the robust momentum, as echoed by the country’s trade ministry who expects the COVID-induced demand for remote activities to persist and thus chip exports to rise more than 10% in 20216. On the basis of a meaningful recovery in anticipation, the Bank of Korea projects the economy to go up 3.0% in 20217.


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

  • The stronger earnings sentiment in the region will continue to lend support to Asian high yield bonds. However, the yield curve steepening will offset some return from the spread tightening.


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.



  1. National Bureau of Statistics, People’s Republic of China, 18 January 2021
  2. Ministry of Finance, Republic of China (Taiwan), 7 December 2020
  3. Directorate-General of Budget Accounting And Statistics, Executive Yuan, Republic of China (Taiwan), 27 November 2020
  4. MSCI, 31 December 2020
  5. Ministry of Trade, Industry and Energy, Republic of Korea
  6. The Bank of Korea


The author is Kelly Chung, our Senior Fund Manager.

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