The Multi-Asset Perspective: July 2019


In this edition of the Multi-Asset Perspective, our Senior Fund Manager Kelly Chung said the market sentiment has improved on the trade war truce and potential rate cuts from the Federal Reserve. Investors will re-focus on economic and corporate fundamentals.

China / Hong Kong Equities

Investor sentiment has improved after the trade truce reached between China and the U.S. at the G20 Osaka Summit. However, there was no significant breakthrough from the G20 event and the outcome has already been expected by the market. Investors will again focus on the economic data and corporate fundamentals going forward as there should not be any significant progress on the trade front in the near term. In addition, due to the trade truce, fiscal and monetary stimuli from China may only be moderated. We expect the market to be range-bound in the near future.

China A-shares

Due to the rate cut expectation from the U.S. and the trade truce, RMB has strengthened vs. USD. Also the lower risk aversion from investors should help A-shares stabilize. However, we don’t expect a significant rally as economic data continue to be weak.

Asia ex-Japan Equities

The weakening global economy remains the biggest headwind for Asia ex-Japan equities. Although earnings momentum has slightly improved, it requires better economic data to come through in order to further boost investor confidence . We currently favor Southeast Asia over North Asia as the former tends to benefit more from a weaker USD and lower U.S. rates.

Emerging Market ex-Asia Equities

Due to the expectation of rate cuts from the Fed, EM ex-Asia equities have enjoyed a rally. Cyclical sectors’ outperformance and stabilizing earnings revision continue to be positive factors. However, the valuation is not cheap at the current level.

Japanese Equities

Valuations in Japan are the most attractive within Asia. We see recovering equity momentum and stabilizing earnings revision after a decline in the last few months. Also, with the trade truce, lower global risk aversion should drive JPY lower, which would be positive for Japanese equities.

Asia Investment Grade Bonds

Asia investment grade bonds are benefiting from expectations of a more dovish Fed and falling Treasury yields. Also, subsiding China credit default swap (CDS) has helped investor sentiment on Asia corporate bonds.

Asia High Yield Bonds

With the trade truce, investors are willing to take more risks in the credit market, especially when the yields of investment grade bonds fall further due to lower government bond yields. Lower equity volatility also helps improve the sentiment on high yield bonds. However, the valuation is relatively demanding at this stage.

Emerging Market Debt

Stronger EM currencies on lower U.S. rate expectations have helped investors’ sentiment on EM bonds. Some of the EM countries are also expected to cut rates along with the U.S. However, the valuation is relatively demanding at this stage.


With a slightly more stabilized geopolitical outlook in the near term, flows may shift back to risky assets from gold after the significant rally last month. However, gold remains to be a good diversifier and hedger in the long run.


Multi-asset investing 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.