The Multi-Asset Perspective: March 2020


In this edition of the Multi-Asset Perspective, our Senior Fund Manager Kelly Chung takes note of heightened risks in the market. 

China / Hong Kong Equities

With China gradually resuming its manufacturing activity and relaxing on lockdowns in some cities, the Hong Kong/ China markets stabilized slightly at the beginning of the month although data coming out from China remained disappointing.  However, since the oil price crash with the break up of the OPEC+ deal alongside exponential growth to coronavirus cases in Europe and the U.S., volatility globally increased dramatically as sentiment took focus ahead of fundamentals. Panic selling began around the world as investors rushed toward cash rather than risk assets regardless of any fundamentals.  We believe volatility will continue in the market as investors are still gauging the real impact on the global economy.  If governments and central banks around the enact swift and large enough stimulus to support the economies, we will see buying gradually emerge as valuations have come down to very attractive levels.

China A-shares

China is currently ahead the rest of the world in combating the coronavirus. On the other hand, economic data is weaker than expected in Q1, so the market is awaiting bigger stimulus measures from the government to support the economy.  The economy has yet to see the full impact, so downsides do remain especially since markets are still trading above average valuations and the global volatility will eventually impact the onshore market.

Asia ex-Japan Equities

Central banks in Asia are returning to rate cuts and easing measures to try to fight against the impact from the coronavirus and many countries have announced relief packages to support the economics.  Countries where they are more externally affected would be hit harder as the risk of a global recession has increased.  Therefore, foreign outflows and volatility will persist as global risk aversion rises dramatically.

Emerging Market ex-Asia Equities

Emerging markets ex-Asia are more sensitive to oil and other commodity prices.  Emerging Europe and Latin America will suffer from the sharp slowdown in Europe and the U.S.

Japanese Equities

JPY volatility is increasing given the uncertainties in the market. Investors had been too complacent with the Japanese market without pricing the risk of the halt or delay of the Tokyo Olympics.  Now, this risk is starting to be priced in. The economic impact will be huge if the games is cancelled or postponed.  With already weak levels of consumption, the economy and the companies would be hugely impacted.  The recovery road for the country will be even a further goal to reach.

Asia Investment Grade Bonds

Asia Investment grade bonds are more resilient and correlated to U.S. Treasury yields.  However, with panic selling across all assets, credit spreads in investment grade bonds are also widening.  When sentiment stabilizes with the help from the governments and central banks, demand for investment grade bonds will return as the interest rate environment globally stays  close to zero or negative.

Asia High Yield Bonds

As the U.S. high yields have been hit by oil price crashes and the risk of a global recession, Asia high yield bonds have been impacted with pessimistic investor sentiment as credit spreads are widening on a relative basis.  On the other hand, Asia high yield bonds have stronger fundamentals being less exposed to the energy sector.  They are a better place to park with yields reaching over 10%.

Emerging Market Debt

Weak oil and commodity prices have caused credit spreads to widen significantly as emerging markets ex-Asia are more sensitive to external demand.


Gold has conventionally been a good hedge against uncertainty. Downward shifts and the flattening of both US and EU yield curves and rising risk aversion provide support for the bullion. However, with panic selling and rushing to hoard on cash, gold will also be occasionally sold down.


Multi-asset offers a lower level of volatility compared to a single traditional asset or a balanced portfolio.  However, the correlation between risk-assets such as equities, credits, and commodities has increased dramatically amid the current market environment.  In an uncertain environment with lower yields, income becomes an important source of return 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.