Investment Insights

Investment Analysis

Stock Markets Analysis

Stock Markets View

  • US stocks rose to a three-month high on softening 10-year Treasury yield, but technical indicators suggested overbought conditions in the market. Sales performance during the long Thanksgiving holiday and movement of long-dated Treasury yields would be the key factors affecting the market sentiment.
  • European stocks have rebounded in recent days along with global stock markets. However, members of the European Central Bank have successively lowered the market expectations on seeing interest rate cuts soon.  Economic data also suggest that the European economy remains subdued. We continue to adopt a wait-and-see attitude towards European stocks.
  • USD weakening has led to capital inflow into some Asian stock markets recently. Continued upward revisions to corporate earnings forecasts for China, Korea and India have been favorable to Asian equities.  
  • The easing of geopolitical tensions is benign to emerging stock markets. However, Argentina’s President-elect Milei has proposed replacing the peso with the US dollar and the market has turned cautious against any negative impact caused on the regional economy.
  • Hong Kong stocks were supported by the RMB rebound  in recent days, with the latest market focus turning to the Mainland’s upcoming release of the November Purchasing Managers Index. As deflationary pressures remain and industrial profit growth slows down, the central government is slated to introduce more measures to stimulate the economy and consumption, as well as  supporting the property 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

Bond Markets View

  • After two weeks of sharp retracement, the US 10-year Treasury yield is expected to consolidate within a narrow range at the current level of around 4.5% in the near term, while the performance of sovereign bonds has been stabilizing.
  • The market is looking forward to US starting to cut interest rates in the middle of next year, and there is a shift of capital from the money market into investment-grade bonds, with highly rated corporate bonds currently offering attractive yields.
  • The current Asian investment-grade bond yields are at a historical high of 5.8% for more than a decade. USD weakening will also facilitate captail inflow into the regional bond markets.
  • US Treasury yields have slid recently, which is good for risky assets such as high-yield bonds. High-yield bonds may continue to be well-supported, given the expectations of the Federal Reserve begining to cut interest rates next year and soft landing of the US economy.
  • China may support financing of the real estate developers, which will help improve the market sentiment. If the government policy to support the property market is implemented and sales pick up in 2024, the Asian high-yield bond market is expected to stabilize.
  • The performance of emerging Asian investment-grade bonds has been relatively stable this year. The economic and political outlook in the regions is gradually becoming conducive, and factors such as the USD weakening are poised to bring renewed attention to the emerging 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 – The result of the US 20-year bond auction and rising expectations of rate cuts next year are positive for the bond market. Currently, yields on high-graded US dollar corporate bonds remain attractive, and it is expected that investors will prefer high-graded US dollar corporate bonds in order to lock in future income.
  • Equities – The stock market has rebounded recently on rising expectations of rate cuts in the US. If the economy successfully makes a soft landing, it will help revise up the  valuations of more sectors. However, investors need to be vigilant about the economic data. Allocation stragegy should include controlling volatility, diversifying across more and different sectors, and including both value and growth stocks. 
  • The US dollar has fallen sharply in the last two weeks on widespread expectations of peaking in the US interest rates. However, the US dollar may temporarily stabilize as the US dollar has slid sharply and is technically oversold, coupled with easing of the Israel-Hamas conflict which  reduces the risk of the US getting involved in the war in the Middle East.
  • The market expects no chance of a rate hike in December, but the FOMC minutes revealed that the Fed has not given up its intention to raise interest rates, limiting further decline of the US Treasury yields. The US will auction multiple batches of Treasury bonds at the end of November, which may increase the volatility in the US Treasury Market.
  • The People's Bank of China (PBOC)  has recently committed to support financing of private-owned enterprises(POEs). The media reported that there may be a "whitelist" to include the POE developers to receive supports. Moreover, Shenzhen has lowered the down payment for buying second home to 40% to stimulate demand for house replacement, and other first-tier cities such as Beijing and Shanghai are expected to follow suit. These measures may help alleviate the financial pressure of the Chinese property developers.

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)

Investment Strategy amid Cool-off in US Inflation (Chinese Only)


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