The Multi-Asset Perspective: June 2019


In this edition of the Multi-Asset Perspective, our Senior Fund Manager Kelly Chung said global markets have entered risk-off mood in June while investors are looking for new market catalysts. Meanwhile, some sectors are presenting value investing opportunities when certain stocks have been oversold.

China / Hong Kong Equities

Investor sentiment remains in risk-off mode following the correction last month. Most investors are sitting on the sidelines and closely watching for any new developments in the ongoing Sino-US trade dispute. Investors are also gleaning through economic data for any signs of a deepening global economic slowdown. While we expect the market to be less volatile than in May, in the absence of any good news, it will likely continue on a gradual downward trend as confidence remains weak and bearish positions by investors are yet to reach an extreme. Until the US and China are able to return to the negotiation table and China unleashes more stimulus, we expect the market to remain weak in the near term. However, some sectors with depressed valuations could become attractive and present long-term buying opportunities once sentiment has reached an extremely bearish level.

China A-shares

The market continues to see significant outflows from institutional investors although flows from domestic retail investors are more resilient. Sentiment remains fragile in light of expectations of a weaker RMB and rotation from growth sectors to defensive sectors.

Asia ex-Japan Equities

We became more cautious about Asia ex-Japan Equities in light of weaker Asian currencies and base metal prices. Rising risk aversion and rotation to defensive sectors also present as leading indicators of a potential weak performance by equities in the near term. We currently favor Southeast Asia to North Asia as the former tends to be less sensitive to trade tensions and have more room for easier monetary policy.

Emerging Market ex-Asia Equities

Weaker base metal prices and downward earnings revisions primarily drove our downgrade. The underperformance of the materials sector, which tends to be a leading indicator for EM ex-Asia markets, indicates this asset class could suffer in the near term.

Japanese Equities

Valuations in Japan are the most attractive within Asia.  However, the rally by the Japanese Yen amid the current risk-off environment has hurt sentiment towards Japanese equities. Downward earnings revisions and the widening Japanese credit spread are also potential negatives for this market.

Asia Investment Grade Bonds

Asia investment grade bonds are benefiting from expectations of a more dovish Fed and the fall in Treasury yields.  However, valuations have become relatively demanding following the recent rally by this asset class. Additionally, surging Chinese credit default swaps (CDS) and the jump in implied volatility for Asian FX options are some concerns surrounding this asset class.

Asia High Yield Bonds

The reaction by Asian high yield bonds since the escalation of the US-China trade dispute has been quite muted.  However, if the risk-off sentiment further deepens, the spread for Asian high yield bonds could widen quite quickly.  Additionally, rising Chinese, Korean and Indonesian CDS are worrying signals.

Emerging Market Debt

Downward earnings revisions, weaker commodity prices, and climbing Mexican and Brazilian CDS present some worrying signs although EM debt has so far been resilient and is benefiting from the lower Treasury yields.  


Gold remains a good hedge, especially against uncertainties on the political front.  Lower yields globally are also favorable for precious metals. 


Multi-asset offers lower volatility compared to a single traditional asset or balanced portfolio.  However, risky assets such as equities, credits, and commodities have become more correlated with each other amid the current risk-off 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.