[Where is the wind blowing under the global asset “Tuyere” wheel movement] Since the beginning of this year, the global asset “tuyere” has been constantly rotating, and assets such as bitcoin, gold, Japanese stocks, and Hong Kong stocks have alternately risen. In the view of the industry, the main factor driving the global asset “tuyere” rotation is the continuous adjustment of investors’ expectations for the global economy and the central bank policies of major economies. At the same time, the characteristics of each asset class are also driving changes in the market.
A number of institutions said that under the background that the downward trend of interest rates has been basically established, the future risk assets have more room to rise. In terms of investment direction, the technology growth sector is still the medium – and long-term main line of the market
Since the beginning of this year, the global asset “tuyere” has been rotating, and assets such as bitcoin, gold, Japanese stocks, and Hong Kong stocks have alternately risen. In the view of the industry, the main factor driving the global asset “tuyere” rotation is the continuous adjustment of investors’ expectations for the global economy and the central bank policies of major economies. At the same time, the characteristics of each asset class are also driving changes in the market.
Standing at the current point, a number of institutions said that under the background that the downward trend of interest rates has been basically established, the future risk assets have more room to rise. In terms of investment direction, the technology growth sector is still the medium – and long-term main line of the market.
Asset classes perform in rotation
Since the beginning of this year, the “tuyere” of global assets has been rotating, from bitcoin to Japanese stocks, gold and copper, and then to Hong Kong stocks, all kinds of assets have taken turns.
For the logic behind the global asset rotation, HSBC Jinxin Shanghai, Hong Kong and Shenzhen fund, Hong Kong Stock Connect double core fund manager Fu Bei Jia analysis said that the upstream resource commodity price rise is mainly driven by the global manufacturing cycle is expected to recover. In addition, in the expectation of interest rate cuts, the US dollar is expected to weaken, promoting the central rise in physical commodity prices. The main factors driving the rise of Japanese and Hong Kong stocks are expectations of a recovery in economic fundamentals and improved liquidity.
“The recent rotation in global assets has been driven primarily by investors adjusting their expectations for the US and global economies, as well as central bank policies in major economies, and by some of the characteristics of asset classes themselves.” Said Zhu Chaoping, senior global market strategist at Morgan Asset Management.
Zhu Chaoping said that at the end of last year, investors’ expectations of downward inflation in the United States and the Federal Reserve’s interest rate cut rose, pushing up stocks, bonds and cryptocurrencies. In the first quarter of this year, US inflation showed strong stickness, and the job market and economic operation showed strong resilience, the market interest rate cut expectations weakened, the valuation of risk assets such as stocks was depressed, and the stock and bond markets adjusted to a certain extent. Since April, valuations in overseas markets are high, and some funds have started to shift to China, where valuations are more attractive and growth prospects are stabilizing, driving Hong Kong stocks higher. In the US stock market, investors also tend to add to the technology sector with strong profit certainty, and the market has reached a new high driven by large-market technology stocks.
In the view of FXTM chief Chinese market analyst Yang Aozheng, all kinds of assets are sought after by funds for different reasons, bitcoin, gold, silver, copper and other assets have been sought after since the end of last year, of which gold and copper prices have hit record highs.
Hong Kong stocks entered a period of consolidation
Since April 22, Hong Kong stocks have staged a strong rally, with the Hang Seng index rising more than 20 per cent at one point. Since then, however, the Hang Seng has reversed course and fallen into a correction.
“The funds flowing into Hong Kong stocks in this round are mainly private equity and hedge funds, and short covering also accounts for a large part. After the rapid valuation repair, Hong Kong stocks may enter a consolidation state in the future, and the future trend will depend more on the prospects of improving economic fundamentals.” Zhu Chaoping said.
Zhao Yaoting, global market strategist at Invesco Asia Pacific ex-Japan, said Hong Kong stocks have performed strongly since March due to the strong performance of A-shares and the improved growth outlook for China’s economy. While there will be some profit-taking in the short term, the recent rally will not be reversed.
Risk assets could be next in line
At this point in time, which types of assets will become the next “tuyere”?
Zhao Yaoting believes that there is more room for risk assets to rise next. His favorite asset in the second half of the year is European equities, as the eurozone is in a cyclical upswing and valuations are attractive. With an inflationary environment in place, the European Central Bank is also likely to cut interest rates soon. With the outlook for economic growth improving, there is also room for upside.
Fu Beijia believes that the downward trend of interest rates has been basically established, therefore, in the interest rate sensitive assets, innovative drug valuation repair market is worth looking forward to; High-dividend assets, benefiting from high certainty of performance and expanding valuations, are still likely to do well. “The earnings elasticity brought about by the improvement of domestic fundamentals is the main divergence point between institutions, and asset allocation may gradually return from ‘export-oriented’ to ‘domestic demand oriented’.” “Fu Beijia said.
Zhu Chaoping said the probability of the Fed starting to cut interest rates in September is high, and the rate cut may be 25 basis points to 50 basis points this year. At present, the market’s expectation of the Federal Reserve’s monetary policy easing is at a low level, and in addition to the US technology sector, most risk asset prices also reflect more conservative expectations. In the future, if the Federal Reserve excessively delays the time of interest rate cut, it may lead to an unexpected decline in the US economy and aggravate asset price volatility.
Zhu Chaoping believes that the technology growth sector may fluctuate in the short term due to changes in investor sentiment, but it is still the medium and long-term main line of the market. The development of artificial intelligence technology may expand from previously upstream hardware and computing power to middle and downstream applications, further promoting productivity development, and relevant industries and enterprises are expected to benefit from it. “In the Chinese market, the relevant large-cap growth stocks have undergone a relatively sufficient adjustment and are expected to attract capital inflows.” Zhu Chaoping said.
