Investment Insights

Daily Insights

Focus of the Day

  • US Q3 GDP growth revised up, supporting the Fed's slower pace of rate cuts

Other Commentaries

  • BoE held rates steady with a cautious easing stance; near-term hike expectations cooled after BoJ kept rates unchanged; RMB fixing saw widest gap against forecasts since July

Investment Analysis

Stock Markets Analysis

Stock Markets View

  • Recent economic data has reinforced market expectations for a 25bps rate cut by the Fed on December 19. Optimism around the US economy persists, with record inflows observed in recent weeks
  • Political uncertainty resurfaces in Europe, with Germany facing a confidence vote on the current government, potentially leading to snap elections. These developments could introduce volatility to European equity markets
  • Ongoing rate cuts in the US and Europe are supporting global economic growth and boosting Asian exports. Additionally, a shift toward moderately loose monetary policy in China is expected to improve investment sentiment across Asian equity markets
  • Inflation concerns and economic reform challenges continue to pose uncertainties for Latin America and other emerging markets. A strong US dollar is also pressuring local currencies, likely contributing to short-term volatility in these equity markets
  • China's moderately accommodative monetary policy, coupled with a focus on boosting domestic demand, signals potential rate cuts, reserve requirement ratio (RRR) reductions, and enhanced consumption-stimulus measures. These actions are expected to bolster equity market sentiment
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

  • The acceleration in US producer price index (PPI) and import price growth has raised concerns that the Fed may slow the pace of rate cuts next year, potentially leading to near-term volatility in sovereign bonds
  • Weak economic performance in the Eurozone could prompt the European Central Bank to expedite interest rate cuts, supporting the performance of Eurozone investment-grade bonds
  • Stable growth in China’s November total social financing and the likelihood of more forceful countercyclical monetary easing by the People’s Bank of China may provide tailwinds for Asian investment-grade bonds
  • Expectations of rate cuts support the US high-yield bond market; however, credit spreads have fallen to multi-year lows, suggesting limited potential for further tightening
  • Tightening credit spreads in Asian high-yield bonds have offset the impact of rising US Treasury yields. Low on-shore government bond yields in China remain favorable for corporate refinancing in the domestic market
  • Emerging market debt remains stable, with the newly appointed Reserve Bank of India's governor likely adopting a more accommodative monetary policy. However, inflation risks warrants close attention
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

Asset Allocation Focus

  • Bonds – The latest US CPI data indicates that inflation remains under control, with the probability of a rate cut in December exceeding 90%. Markets anticipate that the Fed will adopt a gradual approach to rate cuts, maintaining a downward trajectory for short-dated rates in the near term. However, uncertainty surrounding US long-term inflation persists due to potential impacts of Trump’s tariff policies. As such, bond strategies should focus on 3- to 6-year duration USD investment-grade bonds to lock in attractive yields while mitigating the volatility risk associated with US long-dated yields
  • Equities – Inflation in Europe and the US continues its downward trajectory, which is expected to lead to gradual rate cuts by central banks, providing ongoing support for global equity markets. However, the S&P 500 index is currently at elevated valuation levels, prompting greater caution from the market ahead of Trump’s inauguration in January. In the short term, US equities are likely to be driven by sector rotation. Investment in US stocks should include both traditional and growth sectors to achieve a diversified portfolio

 

Provided by Hang Seng Investment Services Limited

Investment Commentaries

第三季增持債券 審慎部署股市

Opportunities and Risks in HK Equities in 2025 (Chinese only)

2025 Q1 Asset Allocation Strategy: Balancing Risks and Opportunities (Chinese only)

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