Investment Insights

Daily Insights

Chart of the Day

  • : Australia's May CPI rebounded to 4%, raising August rate hikes probability

Other Commentaries

  • US jobless claims further declined; Japan’s retail sales rose for 27 months; Israeli airstrikes in Lebanon may escalate Gaza crisis; Third Plenum in China set for July 15-18

Investment Analysis

Stock Markets Analysis

Stock Markets View

  • The US equity market continues to reach new highs, with the Dow Jones outperforming the Nasdaq recently, indicating a broadening rally across traditional value stocks. Investment in US equities should be diversified across various sectors
  • Interest rate cuts have commenced across multiple European regions, and the European Central Bank is expected to further reduce rates this year, supporting economic recovery. However, political instability in France poses uncertainties for regional stock markets
  • Sustained global demand for semiconductors bolsters the fundamentals of Asian tech stocks. With anticipated rate cuts by central banks in the US and Europe, capital may flow into undervalued, high-yield Asian stocks, warranting a balanced investment approach in both tech and high-yield sectors
  • Rebound in inflation numbers in some Latin American markets and ongoing political uncertainties continue to exert pressure on both equities and currencies in the short term
  • Purchases of Hong Kong stocks by state-backed funds have improved market sentiment. However, pressures on the RMB and the pending implementation of the Stock Connect expansion have led to consolidation around the 50-day moving average. The market is closely watching for reform measures from the upcoming July Third Plenary Session
Note:

Positive - Expect that the particular asset class potentially may perform well relative to the relevant major global benchmark(s) in the long run
Neutral - Expect that the particular asset class potentially may perform in line relative to the relevant major global benchmark(s) in the long run
Cautious - Expect that the particular asset class potentially may not perform well or in line relative to the relevant major global benchmark(s) in the long run

Provided by Hang Seng Investment Services Limited

Bond Markets View

  • US economic data remained mixed. As the market priced in these figures, U.S. Treasury yields have stayed within a range, resulting in stable performance for sovereign bonds overall
  • Multiple US companies have issued new bonds, slightly widening investment-grade bond spreads. However, strong demand is reflected in continued capital inflows into this sector
  • China has maintained its loan prime rates and domestic financing conditions are kept accommodative. Although the fluctuating performance of the mainland economy has led to a modest widening in spread of the overall Asian investment-grade bonds 
  • The Eurozone composite PMI unexpectedly declined in June, indicating a slowdown in corporate activity recovery. The impact of recent rate cut might take time to materialize, leading to a consolidation of high-yield spreads at current levels
  • Investors are closely watching the effectiveness of inventory reduction policies in improving liquidity for property developers, with the performance of Chinese property bonds remaining stable. Additionally, more Macau's casino operators have successfully issued new dollar-denominated bonds, signaling a revival in the new bond market, which supports refinancing efforts
  • After cutting rates seven consecutive times since August last year, Brazil's central bank has halted rate reductions and raised inflation forecasts for this year and the next. Several Latin American countries face rising inflation risks, potentially putting short-term pressure on local currency bonds in the region
Note:

Positive - Expect that the particular asset class potentially may perform well relative to the relevant major global benchmark(s) in the long run
Neutral - Expect that the particular asset class potentially may perform in line relative to the relevant major global benchmark(s) in the long run
Cautious - Expect that the particular asset class potentially may not perform well or in line relative to the relevant major global benchmark(s) in the long run

Provided by Hang Seng Investment Services Limited

Market Drivers and Near-term Risk Sentiment

Asset Allocation Focus

  • Bonds – US retail sales data for May fell short of expectations, causing long-dated bond yields to decline and strengthening market anticipation that the Federal Reserve may initiate rate cuts in the latter half of the year. This is expected to lead to continued inflows into US investment-grade corporate bonds as investors seek to lock in attractive yields
  • Equities – US equity valuations remain elevated, and recent corrections in some tech megacaps, coupled with upcoming US presidential election debate and the French parliamentary elections, are likely to introduce market volatility. Investment strategies should focus on diversifying across regions and sectors, with an increased allocation to defensive high-yield stocks
  • The dollar is temporarily benefiting from the Federal Reserve's hawkish stance. Additionally, upcoming elections in France at the end of June and in the UK in early July could prompt short-term risk aversion, leading to flows into the dollar as a safe haven, providing support for the currency
  • Recent US economic data has been mixed. May retail sales barely rose and previous months' data were revised downward. However, early June saw the services sector expand at its fastest pace in over two years, and the manufacturing index remained in expansion for the second consecutive month. US Treasury yields have been range bound, with markets closely watching May PCE inflation data
  • At the Lujiazui Forum, the People's Bank of China indicated that future monetary policy would focus more on adjusting short-term interest rates and that it would increase money supply through government bond purchases, though this does not equate to quantitative easing. Additionally, authorities have intensified support for the tech industry, with the China Securities Regulatory Commission introducing the "Eight Articles of the STAR Market (科創板八條)" reform plan to aid high-tech firms in capital market financing and M&A activities

Provided by Hang Seng Investment Services Limited

Investment Commentaries

第三季增持債券 審慎部署股市

Hong Kong Stock Market Express (Chinese Only)

US Equities Outlook Revised to Neutral: Significant Outperformance Against Global Markets Unlikely
 (Chinese only)

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