Investment Insights

Daily Insights

Chart of the Day

  • Gold prices faced pressure, testing the US$2,280 technical support

Other Commentaries

  • US PPI inflation eased slightly; Aussie unemployment rate unexpectedly fell; China called for BRICS expansion; PBOC promoted relending for affordable housing

Investment Analysis

Stock Markets Analysis

Stock Markets View

  • Recent employment data has tempered expectations for rate cuts, yet strong performance in semiconductor stocks has propelled the S&P 500 and Nasdaq to new highs. In the medium to long term, inflation trends and the Federal Reserve's stance on rate cuts remain critical factors
  • The European Central Bank's rate cut, as anticipated, came alongside upward revisions to inflation forecasts for this year and next. The future trajectory of rate cuts remains uncertain. Additionally, the snap parliamentary elections in France could impact the European equities outlook
  • Following significant volatility due to election results, Indian equities have reached new historical highs, although current valuations appear stretched. Diversifying across various Asian markets may offer a more stable investment approach
  • Despite recent corrections from high commodity prices and the uncertainty brought by election outcomes in several Latin American and emerging markets, substantial currency depreciation could exert pressure on these economies
  • Diminished expectations for U.S. rate cuts have led to consolidation in Hong Kong stocks. However, the gradual implementation of policies to reduce housing inventory and promote capital market development in mainland China is expected to support Hong Kong equities
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

  • U.S. economic data remains mixed, with markets closely watching the Federal Reserve's interest rate decisions and the latest U.S. inflation data. Sovereign bonds are expected to follow the volatility in U.S. Treasury yields
  • Despite persistent economic concerns, U.S. investment-grade bond spreads have widened slightly. However, these bonds have seen 31 consecutive weeks of net inflows, indicating strong market demand
  • China's trade surplus in May exceeded expectations, providing economic support and keeping Asian investment-grade bond spreads low. The anticipated stabilization of China's economy is expected to boost investor sentiment
  • The future direction of the European Central Bank's monetary policy will depend on inflation trends. However, the ongoing economic recovery in the region is likely to support the performance of European high-yield bonds
  • Asian high-yield bond spreads continue to narrow. China's encouragement for banks to meet reasonable financing needs of real estate projects has led the market to closely watch the impact of new measures aimed at stabilizing the housing market on improving property sales and liquidity of the developers
  • Indian Prime Minister Modi's successful re-election, along with the retention of key cabinet members including the finance minister, has contributed to a more stable economic outlook for India, benefiting the local bond market
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 – Despite robust U.S. employment data potentially impacting inflation outlook and the timeline for rate cuts, the prevailing high-interest-rate environment is expected to eventually affect economic and corporate earnings performance. This has accelerated capital inflows into the stable U.S. investment-grade bond market
  • Equities – Following significant volatility due to the Indian elections, the Indian stock market reached new highs, boosting overall Asian equities. However, current valuations of Indian equities are also at high levels. We prefer a diversified approach across various Asian regions. Amidst uncertainty regarding U.S. rate cuts, a high-dividend strategy can enhance defensive positioning
  • Interest rate futures have further delayed the anticipated start of U.S. rate cuts. Strong May employment data has reduced the probability of a November rate cut from 100% to below 70%. Additionally, France's unexpected snap parliamentary elections have caused the euro to retreat, supporting a dollar rebound. Attention should be given to the Fed's mid-June meeting for potential dollar volatility
  • U.S. May non-farm payroll growth significantly exceeded expectations, causing a rise in Treasury yields. The Fed will announce its interest rate decision on the 13th, with market focus on the "dot plot" revealing officials' latest federal funds rate forecasts for the coming year. Treasury yields are expected to react to these projections
  • The China Securities Regulatory Commission (CSRC) has disclosed in advance an announcement of capital market policies at the Lujiazui Forum on June 19-20, expected to include details on the new “Nine Rules” and measures to support the Shanghai capital market. The State Council has urged the preparation of new measures to deplete real estate inventory and stabilize the market, coupled with a focus on financing links of the industrial chain, which suggests promoting capital market development remains a policy priority

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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