Investment Insights

CIO Viewpoints

4Q Asset Allocation: Don’t Fight the Fed

Daily Insights

Focus of the Day

  • US 5-year Treasury yield briefly tops 5%

Other Commentaries

  • France economy returns to expansion, but political risks linger; ADB lifts growth forecast for developing Asia-Pacific; Eurozone September S&P PMI flash readings broadly improve

Market Analysis

FX Markets Analysis

Latest Technical Highlights

NZD - Uptrend↗

Support / Resistance

vs HKD 4.3919 / 4.7056

vs USD 0.56 / 0.60

Reserve Bank of New Zealand Governor Anna Breman said on Tuesday (22nd) that sustained recent oil price gains could push inflation above previous forecasts. She also expects the economic recovery to strengthen and broaden. Her comments lifted expectations of an October rate increase, which could support the New Zealand dollar

 

Legends

Uptrend ↗  Sideways →  Downtrend ↘

*Pertaining to historical technical trend analysis only and do not reflect any forecasts or any forward looking views

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Stock Markets View

  • The Fed rate hike and hawkish guidance pushed bond yields higher, limiting valuation expansion. However, the AI earnings outlook supported a rebound in technology stocks. The outlook remains dependent on inflation trends and earnings delivery
  • A modest pullback in oil prices and European bond yields supported a rebound in European equities. However, inflation in the region is not yet fully under control, and a persistently high-rate environment may constrain valuation expansion
  • Elevated global bond yields, tighter liquidity and oil-price volatility are likely to drive near-term market moves. Nonetheless, Asia’s fundamentals remain solid, and diversification across regional markets and sectors should help mitigate risk
  • Earnings forecasts have been upgraded across several emerging markets, while commodity prices remain elevated. This may help cushion concerns and risks arising from a stronger US Dollar Index and shifts in Middle East geopolitics
  • Hong Kong equities remain within the 24,500-26,400 range. Near-term catalysts include peak season of property sales and further mainland measures to support consumption and industries
Legends

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 FOMC unanimously raised the federal funds target range to 3.75%-4.00%, the first increase since 2023, as inflation remains elevated and well above target
  • European and US investment grade issuers tapped favourable funding windows. Industrial and financial issuers supported European supply, while US technology leaders continued to expand issuance in the euro and sterling bond markets
  • The BoJ raised its policy rate by 25bp to 1.25% last Friday. As the move had been fully priced in, Japanese government bond yields reacted modestly after the decision
  • US high yield bonds initially fell before stabilising. Although yields briefly reached a 16-week high, spreads remained tight, suggesting corporate earnings remain resilient. Oil-price developments remain in focus
  • Asian high yield bonds weakened on higher oil prices and US Treasury yields, although fundamentals remain sound. Mainland data point to resilient manufacturing, soft domestic demand and continued sector divergence
  • Brazil’s easing cycle continues, with slower growth paving the way for further policy accommodation. High carry and real yields continue to support local-currency bonds
Legends

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

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