Investment Insights

Daily Insights

Chart of the Day

  • S&P 500 volatility increased amid recent sector rotation

Other Commentaries

  • US Q2 GDP grew 2.8%, beating estimates; US Jun durable goods orders mixed; Italian Prime Minister to visit China;  Mainland to issue RMB 300 bn in government bonds for equipment upgrade support

Investment Analysis

Stock Markets Analysis

Stock Markets View

  • The tech sector has recently underperformed, with capital rotating into value stocks, as various industries are expected to benefit from the Fed’s rate cuts. The market's current focus is on the ongoing Q2 corporate earnings season
  • ECB President Lagarde has adopted an open stance towards a September rate cut, with the market pricing in over 50% odds. However, declining demand for luxury goods and disruptions in travel stocks due to IT outage may weigh on European market performance
  • Asian tech stocks have been under pressure due to a pullback in global tech stocks. Investment positioning may focus on Asian high-yield stocks with attractive valuations and strong resilience, which are poised to benefit from anticipated rate cuts by Western central banks
  • Latin American emerging economies continue to show stable growth. Nonetheless, recent declines in commodity prices, coupled with inflation and political risks, may influence short-term market performance
  • Hong Kong stocks are pressured by concerns over escalating U.S.-China trade tensions. However, supportive measures such as the Mainland’s enactment of new law to facilitate the development of private sector and state-owned enterprise economic value-added accounting, coupled with the rate cut by the People's Bank of China, should bolster the economic outlook
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 market is convinced that the Federal Reserve will start cutting rates in September and it is expected that US Treasury yields will follow the downward trend in policy rates in the future, thereby supporting the overall performance of sovereign bonds
  • Pick-up in US Treasury yields have not deterred capital from flowing into bonds, with investment-grade bond funds recording net inflows for 38 consecutive weeks as of mid-July, reflecting strong demand for high-quality bonds
  • The People's Bank of China and mainland banks have lowered the 7-day reverse repo rate and loan prime rates, respectively, increasing support for the economy. Currently, mainland government bond yields remain at historically low levels, creating a favorable financing environment for corporations
  • The US high-yield bond market has posted gains for seven consecutive weeks. However, valuations in this sector are relatively high, suggesting limited room for further narrowing of credit spread
  • The recent Third Plenum in China indicated that local governments would be given more autonomy in housing market regulation, potentially leading to a further relaxation of home purchase restrictions. This is expected to sustain turnover in the housing market, positively influencing the investment sentiment towards Chinese property bonds
  • A potential US rate cut could reduce capital outflows from emerging market bonds. However, inflation risks in certain Latin American countries remain a concern, making it challenging for the Mexican central bank to implement effective monetary policies while balancing economic growth and inflation
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 – Federal Reserve Chairman Powell indicated that US inflation is receding and the job market is slowing. This enhances confidence in achieving the 2% inflation target. The market expects a high likelihood of a rate cut in September, which is anticipated to drive continued capital inflows into US dollar-denominated bond assets
  • Equities – President Biden's withdrawal from the election and the high chances of a Trump victory are favorable for certain US equity sectors. Additionally, the anticipation of rate cuts is expected to benefit a broader range of sectors. Capital is flowing out of the technology sector. Investment strategies should consider a balanced approach across growth, value, and defensive sectors such as utilities, healthcare, and real estate
  • The market is awaiting the release of the US Q2 GDP and June PCE price index, which are expected to confirm the easing inflation trend. If realized, this could pave the way for a rate cut in September. The FOMC meeting on July 31 will further clarify monetary policy direction. Until the data is released, the dollar is expected to trade sideways
  • US Treasury yields have slightly rebounded from recent lows. The Federal Reserve's Beige Book reflects that businesses anticipated election uncertainties, geopolitical conflicts, and inflation to slow economic growth over the next six months, reinforcing expectations for a rate cut in September. Consequently, US Treasury yields are expected to trend downward in the medium to long term, following the Federal Funds Rate
  • The Third Plenum emphasized leveraging the guiding role of economic system reforms, including initiating economic value-added accounting for state-owned enterprises, and advancing private economy promotion law to support private enterprises in driving technological breakthroughs. On the real estate front, reforms in financing, sales and tax systems aim to build a new development model. All these are expected to improve long-term economic prospects

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)

Expectations spike for a Fed rate cut in Sep, gold prices reached new high (Chinese only)

Need more help?

Visit our branches

Footnote

Disclaimer

Information provided on these webpages is for general information and reference only and does not constitute nor is it intended to be construed as any professional advice, offer, solicitation, or recommendation to deal in any securities or investments. Investors should note that all investments involve risks (including the possibility of loss of the capital invested), prices of securities, foreign exchange, commodity and investment products may go up as well as down and past performance is not indicative of future performance. Investors should read the relevant investment offering documents and terms and conditions (including the full text of the risk factors stated therein) in detail before making any investment decision.

a. (For information produced by Hang Seng Bank Limited or its affiliates) The information is provided by Hang Seng Bank Limited or its affiliates ("Hang Seng") for general information and reference only and does not constitute nor is it intended to be construed as any professional advice, offer, solicitation, or recommendation to deal in any of the securities or investments mentioned herein. The information provided is based on sources which Hang Seng believes to be reliable but has not been independently verified. Any projections and opinions expressed herein are expressed solely as general market commentary and do not constitute solicitation, recommendation, investment advice, or guaranteed return. They represent the views of Hang Seng or the analyst(s) who prepare(s) the information at the time of publication and are subject to changes without notice. No guarantee, representation, warranty or undertaking, express or implied, is made as to the fairness, accuracy, timeliness, completeness or correctness of any general financial and market information, news services and market analysis, projections and/or opinions (“Market Information”) provided on these webpages and the basis upon which any such Market Information have been made, and no liability or responsibility is accepted by Hang Seng in relation to the use of or reliance on any such Market Information whatsoever provided on these webpages. Investors must make their own assessment of the relevance, accuracy and adequacy of the information, projections and/or opinions provided on these webpages and make such independent research/investigations as they may consider necessary or appropriate for the purpose of such assessment. Hang Seng does not make any representation or recommendation or assessment as to whether or not any of the investment(s) mentioned herein is/are suitable or applicable to any persons and thus shall not be held responsible in this regard. Investors should make investment decision(s) based on his/her own financial situation, investment experience, investment objectives, and specific needs; and if necessary, should seek independent professional advice before making any investment decision(s).

All investments involve risks. Investors should note that prices of securities, foreign exchange, commodity and investment products may go up as well as down and past performance is not indicative of future performance. Investors should read the relevant investment offering documents and terms and conditions (including the full text of the risk factors therein) in detail before making any investment decisions.

The research analyst(s) who prepared the information certifies(y) that the views expressed herein accurately reflect the research analyst's(s') personal views and that no part of his/her/their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in the information provided on these webpages.

b. (For information produced by third-party information providers) Hang Seng Bank Limited and its affiliates (“Hang Seng”) neither endorses nor is responsible for the accuracy or reliability of, and under no circumstances will Hang Seng be liable for any loss or damage caused by any opinion or statement made in the information produced and provided by third-party information providers. The information is for general information and reference only and does not constitute nor is it intended to be construed as any professional advice, offer, solicitation or recommendation to deal in any of the securities or investments mentioned herein. Any projections and opinions expressed herein are expressed solely as general market commentary and do not constitute solicitation, recommendation, investment advice, or guaranteed return. The opinions expressed are those of the featured speaker(s), and do not represent Hang Seng's views. The opinions given by the featured speaker(s) are subject to changes without notice and should not be construed as a solicitation, recommendation, or advice on any individual holdings or market sectors. No guarantee, representation, warranty or undertaking, express or implied, is made as to the fairness, accuracy, timeliness, completeness or correctness of any third party information, projections and/or opinions provided on these webpages and the basis upon which any such third party projections and/or opinions have been made, and no liability or responsibility is accepted by Hang Seng in relation to the use of on any such third party information, projections and/or opinions whatsoever provided on these webpages. Investors must make their own assessment of the relevance, accuracy and adequacy of the information, projections and/or opinions provided on these webpages and make such independent research/investigations as they may consider necessary or appropriate for the purpose of such assessment. Hang Seng does not make any representation, solicitation, recommendation, or assessment as to whether or not any of the investment(s) mentioned herein is/are suitable or applicable to any persons and thus shall not be held responsible in this regard. Investors should make investment decision(s) based on his/her own financial situation, investment experience, investment objectives, and specific needs; and if necessary, should seek independent professional advice before making any investment decision(s).

All investments involve risks. Investors should note that prices of securities, foreign exchange, commodity and investment products may go up as well as down and past performance is not indicative of future performance. Investors should read the relevant investment offering documents and terms and conditions (including the full text of the risk factors therein) in detail before making any investment decisions.

These webpages have not been reviewed by the Securities and Futures Commission of Hong Kong or any regulatory authority in Hong Kong.

It is prohibited to reproduce, store in a retrieval system, or transmit, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise any part of the information provided on these webpages. The information provided on these webpages is solely for personal and non-commercial use and for general information and reference only. Re-distribution of any part of the information in any means or use of the information for any other purposes is strictly prohibited.