The Multi-Asset Perspective: October 2019


In this edition of the Multi-Asset Perspective, our Senior Fund Manager Kelly Chung said valuation has reached a historical low level in mainland China and Hong Kong stock markets. Meanwhile, Asian high yield bonds have been relatively resilient amid recent corrections in the equity market. 

China / Hong Kong Equities

Investor sentiment in Hong Kong faces a double whammy of social unrest and trade war escalation. Economic data in both Hong Kong and Chinese mainland continue the weakening trend with no imminent recovery in sight.  Although investor positioning has already been very low, investors are still on the sideline with high put/call ratio.  Momentum is weak and capital outflow, although now relatively small, is a warning sign.  On the other hand, we believe there will be more stimulus coming out after the Politburo meeting in October.  Valuation has also reached a historical low level.

China A-shares

Due to the optimism over further stimulus to offset the impacts of the escalating trade war and the weakening economic growth, A-shares have outperformed offshore Chinese equities quite significantly.  However, valuation is not attractive due to the rising A-H premium and the spiked-up short-term volatility in the equity market.

Asia ex-Japan Equities

Valuation has been emerging after the recent correction, especially when compared to the Asia ex-Japan corporate bond yield.  However, sluggish economic growth continues to hinder corporate earnings recovery, despite many Asian central banks have already cut interest rates to support their economies.  A wider credit spread is also a warning sign for equities and momentum remains weak with higher sector dispersion.

Emerging Market ex-Asia Equities

While emerging markets ex-Asia have plenty of room to cut interest rates given the manageable inflation, market sentiment is impacted by global trade uncertainties.

Japanese Equities

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

Asia Investment Grade Bonds

Asia investment grade bonds are benefiting from the significant fall in U.S. Treasury yields.  However, rising China credit default swaps (CDS) and a weaker corporate sentiment have caused the already very tight spread to start to widen.  Also, Treasury yields have already reached a historical low level and are easy to reverse if recession expectation eases.

Asia High Yield Bonds

Asia high yield bonds have been relatively resilient amid recent corrections in the equity market.  However, with the rising CDS in Asian countries, there could be more pressure on the Asia high yield bond space when volatility rises again.

Emerging Market Debt

Spreads in emerging market bonds have remained relatively tight, although sentiment remains weak amid geopolitical uncertainties and global trade tensions.


Gold is a good hedge amid political uncertainties.  Also, with global central banks in an easing mode, investors would put money into gold rather than investing in negative-yielding bonds.  However, with recession expectations indicating a strong USD, the metal would be difficult to continue its recent strong rally.


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 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.