The Multi-Asset Perspective: October 2020


A slew of uncertainties on the top of investors’ minds includes the upcoming U.S. presidential election and the intensifying tensions between the U.S. and China. While the market performance may hinge on the election outcome, we continue to monitor liquidity and company earning.

Key indicesSeptember performanceYTD
MSCI Asia Ex-Japan Index (in USD)-1.5%5.4%
MSCI China Index (in USD)3.4%17.7%
CSI 300 Index (in CNY)-4.1%16.9%
Hang Seng Index (in HKD)-6.4%-13.8%
Taiwan Stock Exchange Index (in TWD)-0.3%7.8%
MSCI Taiwan Index (USD)2.0%14.5%
JPM ACI China Total Return Index (in USD)-0.5%4.9%
JPM Asia Credit Total Return Index (in USD)-0.5%4.4%

Source: J.P. Morgan, MSCI, Morningstar, Data as of 30 September 2020


China / Hong Kong Equities

  • China’s macro indicators continue to suggest that the economic recovery is on track.
  • A slew of uncertainties is now on the top of investors’ minds, such as the upcoming U.S. presidential election and the intensifying tensions between the U.S. and China. Therefore, we would expect a volatile month ahead.
  • The strong Renminbi would continue to be a positive factor for the equity market.

China A-Shares

  • China’s foothold in the recovery trajectory is evidently strong. To those who fear that the recovery may lose steam in the last quarter of 2020, it is a relief to see the economic data continues to be on the upside.
  • Since May, factory activities’ resumption has brought the mainland’s industrial production back to a year-on-year growth for consecutive months. Similarly, fixed asset investment also saw encouraging signs of a turnaround, implying a significant pick-up in real estate activities. On a sector level, despite battered in the early COVID-19 outbreak, retail and property sales on the mainland have climbed back to the expansion territory, with the year-on-year growth in online retail sales and home sales both reaching a double-digit level.
  • We expect the economy to be fully recovered by end-2020, and re-enter the expansionary terrain in 2021.
  • Political risks such as the U.S. presidential election and the Cross-Strait relations remain the risk factors.

Asia ex-Japan Equities

  • Foreign capital still hesitates to flow back to Asia as investors are wary of the economic recovery in some economies, such as India and Southeast Asia. The former posts the second-highest number of the COVID-19 cases in the world after the U.S, while the latter lacks the resumption process to regular economic activities.
  • The tit-for-tat actions between the U.S. and China have been on our radar, particularly the period leading up to the U.S. presidential election in November. Lately, the U.S. administration takes aim at China’s largest foundry Semiconductor Manufacturing International Corporation (SMIC) for it being reportedly manufacturing for military end-users. The newest round of restrictions bans SMIC from obtaining American technologies without a license, in addition to the existing set for the smartphone maker Huawei Technologies.
  • Undoubtedly, the expanding list of sanction in the advanced tech area has injured China’s fledging semiconductor industry, which is reflected in the slowdown of 5G-related projects due to the limited supply of critical components and knowhow. Moreover, the changing tide could potentially channel some existing orders to Taiwan-based foundries and suppliers.
  • Analysts continue to upgrade the earnings forecast, especially for North Asian companies.
  • With the USD’s structural weakening trend under the dovish U.S. Federal Reserve, Asian currencies will continue to strengthen in the longer term, eventually attracting foreign capital.

Emerging Market ex-Asia Equities

  • After some good runs in oil and industrial metal prices, they started to reverse technically. EM ex-Asia markets will also be subject to some reversal as they are sensitive to commodity prices.
  • A structural weakening USD will lend support to EM ex-Asia markets over the longer term.

Japanese Equities

  • The valuation of Japanese equities remains at an elevated level despite a lack of improvement in the economy and fundamentals.
  • We do not expect any significant changes in the near term with the new prime minister taking office, although it would remain to be seen over the longer run.

Asia Investment Grade Bonds

  • With the yield curve steepening with rising inflation expectation, a near-term correction is likely after such a strong rally.
  • Given the uncertainties, especially on the political side, investment grade bonds would remain in high demand.

Asia High Yield Bonds

  • The stronger earnings sentiment in the region will continue to lend support to Asian high yield bonds.
  • The steepening yield curve and rising inflation expectation would hinder its performance.

Emerging Market Debt

  • Oil and industrial metal prices saw technical reversal after several strong sections. Credit spread in the EM bonds has begun to widen.


  • Gold has been a good hedge against uncertainties. The massive monetary easing and fiscal deficit prove to be adverse to the USD and reflationary in the longer term, supporting gold demand.
  • With the yield curve steepening and the skewed sentiment and positioning in Gold, it will undergo a consolidation phase in the near term.


  • Multi-asset offers a lower volatility level compared to a traditional single asset or a balanced portfolio.
  • 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 author is Kelly Chung, our Senior Fund Manager.

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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.

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