The Multi-Asset Perspective: November 2019


In this edition of the Multi-Asset Perspective, our Senior Fund Manager Kelly Chung said positive developments in U.S.-China trade negotiations boost market sentiment and support upward earnings revisions in Greater China equities. 

China / Hong Kong Equities

Investor sentiment is lifted as a phase 1 trade deal between the U.S. and China is highly likely to be signed before year-end. RMB is stabilizing and further supports the outlook of corporate profit recovery next year. With the Fed delivering rate cut on track and with its balance sheet expanding again, global risk aversion has receded. Valuation is attractive in Hong Kong/ China, however, the economic slowdown in Hong Kong and the continued social unrest remain impediments for further rally in the equity market.

China A-shares

A potential first phase trade deal by year-end between the U.S. and China is conducive to market sentiment improvement while a stabilizing RMB further supports corporates’ earnings recovery next year. With the interest rates continue on a downward trend, the ample liquidity will continue to support the market although another large scale stimulus seems to be unlikely before the year-end with the trade talks progressing well.

Asia ex-Japan Equities

With the Fed continues with an easing bias, the USD has peaked and will continue to weaken gradually. Strengthening Asian currencies are very supportive to the equity market. However, the sluggish economic growth still hinders corporate earnings recovery although many Asian central banks have already been cutting interest rates to support their economies. Bottoming manufacturing activities are a prerequisite for a sustainable rally in the equity market.

Emerging Market ex-Asia Equities

Emerging markets ex-Asia have plenty of room to cut interest rates given the manageable inflation, although valuation has become less favorable.

Japanese Equities

Valuation in Japan is the most attractive within Asia. We see stabilizing earnings revisions after a decline in the last few months. Foreign interest in Japanese equities has increased as evidenced by higher trading volume. JPY’s implied volatility has also dropped. However, consumer sentiment has dipped after the consumption tax hike since Oct. 1.

Asia Investment Grade Bonds

Asia investment grade bonds are benefiting from a weaker USD and declining China credit default swaps (CDS). However, Treasury yields have already reached a historical low level and are easy to reverse if recession expectation fades. When that happens, Asia investment grade bonds will suffer from the duration perspective.

Asia High Yield Bonds

The spread of Asia high yield bonds has narrowed thanks to the lower global risk aversion, falling CDS in China, Indonesia and Korea in particular, and a stabilizing RMB. However, a sign of economic bottoming needs to be seen for a further rally.

Emerging Market Debt

Spreads in emerging market bonds have further narrowed thanks to the lower global risk aversion, falling CDS in Brazil and Mexico, lower EM bond volatility and inflows back to EM as the Fed continues with the easing bias.


Gold is a good hedge amid political uncertainties. Also, with global central banks on an easing mode, investors would put money into gold rather than negative-yielding bonds. However, with yield curves steepening while global risk aversion recedes, technically it is not favorable for gold in the near term.


Multi-asset 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.