The Multi-Asset Perspective: May 2020


Flushed with ample liquidity, investors in many markets enjoyed a relief rally in April. Our Senior Fund Manager Kelly Chung discusses in this edition of the Multi-Asset Perspective that investors should alert the risks on the economy and corporate earnings that underlie the intensifying Sino-U.S. conflict, leaving a limited amount of visibility.


China / Hong Kong Equities

As the COVID-19 situation stabilizes globally, especially in Hong Kong and China, risk aversion subsides. Improved sentiment provides a positive momentum to the equity market. However, with valuation back to the historical average, the market tends to be sideway as investors are looking for the next positive news as the market has already priced in a recovery starting in Q2 with ample liquidity from central banks. The most considerable risk facing the investment market is the underestimation of the real impacts on the economy and corporate earnings. The market’s focus is now shifting to U.S.-China political tension from the virus spread, creating much noise, and a high level of visibility is unlikely.


China A-Shares

China’s National People’s Congress is scheduled for 22 May, where the market expects more stimulus to be announced. So far, April’s data is better than expected, and the recovery is on track. The valuation has returned to the pre-virus level and slightly above average.


Asia ex-Japan Equities

On a regional level, capital outflow continues, especially from Southeast Asian countries. Also, the strong USD continues to suppress market sentiment. Earnings downgrade continues and will accelerate, especially in Southeast Asia. The political tension and possible reshuffle of the global supply chain hurt investor sentiment. We prefer North Asia countries to their Southeast counterparts due to the former’s healthier surplus and clearer industry focus, such as consumption and technology.


Emerging Market ex-Asia Equities

Emerging market (ex-Asia) is highly sensitive to the prices of oil and other commodities. With the visibility of a low demand on industrial commodities, Emerging Europe and Latin America will continue to be out of investors’ favor.


Japanese Equities

The Bank of Japan has enlarged the asset purchase program to support the market. Though, Japanese equities still lag other regions in the latest round of relief rally. While the economy is expected to soon reopen, the market may play catch-up, but its fundamentals remain weak.


Asia Investment Grade Bonds

The investor sentiment on IG bonds is upbeat following the U.S. Federal Reserve’s announcement on the purchase of domestic IG corporate bonds and even fallen angels. Asian IG bonds also benefited from the improved sentiment. With the yield searching amid the ample market liquidity, the spread between Asia and U.S. IG continues to tighten.


Asia High Yield Bonds

After the Fed announces expanding the bond purchase even to include fallen angels non-IG bonds, volatility in the global high yield space has quickly normalized. The credit spread in Asia HY has swiftly tightened. With recovering momentum in the financial and industrial equities, a more positive outlook is expected among the Asian HY space.


Emerging Market Debt

Valuation is attractive, given the tightening in other bond sectors. With stabilized volatility in the commodity markets and moderated CDS in several EM countries, investor demand will likely return, given the attractive yield spread.



Gold has been a good hedge against uncertainties. The massive monetary easing and fiscal deficit will be negative to the U.S. dollar and reflationary in the longer term. In comparison, they are favorable to gold.



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 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.