Perspective - Managers' views

Amid elevated volatility, where do opportunities lie?

In the near term, we believe volatility is likely to remain elevated as markets react to the shifting messages from US-China talks.

05/11/2019

Jason Yu

Head of Multi-Asset Product, North Asia

In the near term, we believe volatility is likely to remain elevated as markets react to the shifting messages from US-China talks. With global growth at lacklustre levels and as trade negotiation uncertainty remains, likelihood of a global recession could create further downward pressure on markets.

Despite these rising risks, our central scenario remains largely unchanged and we find the risk of an immediate recession unlikely as the accommodative stance from global central banks continues to lend support.

Income the way to go?

As interest rates fell, the attractiveness of income strategy and stocks that offer solid dividend yields has once again become more apparent. Amid heightened volatility, the REITs and defensive sectors continue to offer stability.

Within the REIT sector, we continue to focus on rotating from names that are more expensive such as in Hong Kong and Singapore, to cheaper ones, such as those in India and Australia. Moreover, upcoming regulatory changes in a number of countries like the Philippines to allow new REITs listing are expected to bring some interesting opportunities to the market.  

The China banking sector may be hampered by macro headwinds and earnings pressure, necessitating investors to apply further scrutiny to select good banking stocks in China. In addition, we expect an increased risk of a cyclical slowdown to potentially translate to lower demand for commodities and energy.

Continued support of Asian USD credit markets

We expect the dovish tone from key global central banks, as well as their counterparts in the region, to help alleviate growth concerns and thus remain generally supportive of Asian USD credit markets. Fundamentals also remain stable overall and we expect lower yield and interest rates to remove many of the concerns over re-financing risk of the market.

From a technical perspective, given the expectation of lower yields, demands should remain robust over the near-term as investors aim to lock in the higher yields currently on offer.

 

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