Corporate bond valuations improve

Transcription

1 09 2 August 2018 Corporate bond valuations improve Key takeaways A stronger investment case for corporate bonds We move from underweight to neutral on US investmentgrade (IG) and high-yield (HY) corporate bonds, resulting in a move from underweight to neutral for global IG and HY corporate bonds. We also move from underweight to neutral on US dollar (USD) emerging-market (EM) debt Global equity markets rose in July, as upbeat corporate earnings results outweighed lingering global trade concerns Amid strong economic data and despite rising trade tensions, Federal Reserve (Fed) Chair Powell testified that interest rates would keep gradually rising, for now Recent eurozone activity indicators suggest growth has stabilised, following a weakening in Q1. The European Central Bank (ECB) remains on course to terminate its net bond-buying programme by the end of the year In China, monetary easing, a slower pace of regulatory tightening and more funding for local government projects should help contain the risk of a sharp growth slowdown The Bank of Japan downgraded its inflation forecasts for the next three years and reiterated monetary policy will remain very accommodative for an extended period of time Global economic growth slowed at the start of 2018, but has since stabilised at a good pace. Meanwhile, corporate fundamentals remain solid and default rates low. Yet recently, we think corporate bonds have become increasingly attractive on a valuation basis, especially in the US. Therefore, we move from underweight to neutral on US investment-grade (IG) and high-yield (HY) corporate bonds, resulting in an upgrade to our stance on global IG and HY corporate bonds from underweight to neutral. We are also more positive on European equivalents, although we remain underweight here as the improvement in valuations has not been as significant. Elsewhere, the recent sell-off in EM assets has improved valuations for USD-denominated EM debt, and we also upgrade our view to neutral from underweight. Our previous preference was to be invested in global equities and US Treasuries as a way to mimic the payoff from corporate bonds. We counterbalance this month s view changes by moving away from this stance. Nevertheless, global equities remain a superior way to benefit from the robust global environment, and increased volatility presents buying opportunities, in our view. Meanwhile, we think US Treasuries are still relatively attractive versus other DM government-bond markets, especially for two-year notes, although higher US inflation is a key risk for this asset class. Equities Government bonds Corporate bonds & other Asian assets Asset Class View View Move Asset Class View View Move Asset Class View View Move Asset Class View View Move Global OW Developed Market (DM) UW Global investment grade (IG) N EM Asian fixed income UW US N US UW USD IG N Asia ex-japan equities OW UK N UK UW EUR and GBP IG UW China OW Eurozone OW Eurozone UW Asia IG N India OW Japan OW Japan UW Global high-yield N Hong Kong N Emerging Markets (EM) OW EM (local currency) OW US N Singapore OW CEE & Latam N Europe UW South Korea OW Asia N Taiwan N EM agg bond (USD) N OW = Overweight; N = Neutral; UW = Underweight Gold N Other commodities N ` Real estate N This commentary has been produced by HSBC Global Asset Management to provide a high level overview of the recent economic and financial market environment, and is for information purposes only. The views expressed were held at the time of preparation; are subject to change without notice and may not reflect the views expressed in other HSBC Group communications or strategies. This marketing communication does not constitute investment advice or a recommendation to any reader of this content to buy or sell investments nor should it be regarded as investment research. The content has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of its dissemination. You should be aware that the value of any investment can go down as well as up and investors may not get back the amount originally invested. Furthermore, any investments in emerging markets are by their nature higher risk and potentially more volatile than those inherent in established markets. Any performance information shown refers to the past and should not be seen as an indication of future returns. You should always consider seeking professional advice when thinking about undertaking any form of investment.

2 Long-term asset class positioning (>12 months) Basis of Views and Definitions of Long term Asset class positioning table Views are based on regional HSBC Global Asset Management Asset Allocation meetings held throughout July 2018, HSBC Global Asset Management s long-term expected return forecasts which were generated as at 29 June 2018, our portfolio optimisation process and actual portfolio positions. Icons: View on this asset class has been upgraded No change View on this asset class has been downgraded Underweight, overweight and neutral classifications are the high-level asset allocations tilts applied in diversified, typically multi-asset portfolios, which reflect a combination of our long-term valuation signals, our shorter-term cyclical views and actual positioning in portfolios. The views are expressed with reference to global portfolios. However, individual portfolio positions may vary according to mandate, benchmark, risk profile and the availability and riskiness of individual asset classes in different regions. Overweight implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks, HSBC Global Asset Management has (or would have) a positive tilt towards the asset class. Underweight implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks, HSBC Global Asset Management has (or would) have a negative tilt towards the asset class. Neutral implies that, within the context of a well-diversified typically multi-asset portfolio, and relative to relevant internal or external benchmarks HSBC Global Asset Management has (or would have) neither a particularly negative or positive tilt towards the asset class For global investment-grade corporate bonds, the underweight, overweight and neutral categories for the asset class at the aggregate level are also based on high-level asset allocation considerations applied in diversified, typically multi-asset portfolios. However, USD investment-grade corporate bonds, EUR and GBP, and Asia investment-grade corporate bonds are determined relative to the global investment-grade corporate bond universe. For Asia ex Japan equities, the underweight, overweight and neutral categories for the region at the aggregate level are also based on high-level asset allocation considerations applied in diversified, typically multi-asset portfolios. However, individual country views are determined relative to the Asia ex Japan equities universe as of 31 July Similarly, for EM government bonds, the underweight, overweight and neutral categories for the asset class at the aggregate level are also based on high-level asset allocation considerations applied in diversified, typically multi-asset portfolios. However, EM Asian Fixed income views are determined relative to the EM government bonds (hard currency) universe as of 31 July Equities Asset class View Movement Rationale Global Overweight Rationale of overweight views: Our measure of the global equity risk premium (excess return over cash) is still reasonable given where we are in the profits cycle. Global economic growth remains solid, driving global equity markets to deliver positive returns over the long term. Overall, support from still-loose monetary policy and fiscal policy (if needed) will, in the medium and longer term, likely outweigh any headwinds from more modest Chinese growth, monetary policy normalisation in DM economies, and political uncertainty in many regions. Risks to consider: Fairly narrow implied equity risk premiums limit the ability of the market to absorb bad news. Episodic volatility may be triggered by concerns surrounding global trade protectionism, Chinese growth, and/or a potentially more rapid than expected Fed, ECB or BoJ normalisation of policy, coupled with political risks. A notable and persistent deterioration of the global economic outlook could also dampen our view. US Neutral Positive factors: Despite a recent pickup in market volatility, corporate fundamentals remain strong, the earnings growth outlook looks solid (with upside risks from tax reform), and the US macroeconomic backdrop is still robust. Overall, our measure of the implied risk premium (excess returns over cash) remains consistent with a neutral positioning. Risks to consider: The magnitude of the boost to GDP growth from tax reform is likely to be small given where we are in the cycle. Further Fed policy tightening also poses risks. We are getting closer to the critical point where we need to reassess whether we are being offered enough return to take on equity risk in this market. Risks from US protectionism also need to be considered, especially if further rounds of tit-for-tat actions materialise. UK Neutral Positive factors: Major UK equity indices are heavily weighted to financial and resource stocks which should benefit from higher commodity prices and rising interest rates. Overall, however, current valuations are consistent with a neutral positioning, in our view. Risks to consider: The prospective reward for bearing equity risk in the UK is relatively low compared to other markets. The UK economy is underperforming amid low real wage growth and Brexit-related uncertainty. Eurozone Overweight Rationale of overweight views: Eurozone equities benefit from relatively high implied risk premiums and scope for better earnings news given the region s earlier point in the activity cycle. Ultra-low ECB policy interest rates are likely to persist until the end of the decade. Risks to consider: The recent softening of activity indicators requires monitoring. EU-US trade barriers pose a significant risk to the outlook, as does the new populist government in Italy and Brexit negotiations. ECB monetary policy may also be less accommodative than expected. Source: HSBC Global Asset Management. All numbers rounded to one decimal place Past performance is not an indication of future returns. 09/08/2018 Investment Monthly 2

3 Japan Overweight Rationale of overweight views: The relative valuation is attractive, in our view, whilst policy is supportive. Large corporate cash reserves provide firms with the scope to boost dividends or engage in stock repurchases. The trend in earnings growth remains positive. Risks to consider: Although there has been a pick-up in investment, a moderation in world trade growth will weigh on GDP growth this year. Other headwinds include a consumption tax increase planned for October 2019, and weak wage growth. Protectionism is a key risk. Emerging Markets (EM) Overweight Rationale of overweight views: EM economic growth remains solid, although there are some notable exceptions (e.g. Brazil and Turkey). We think valuations offer a decent margin of safety, and there is still significant potential for (selected) EM currencies to appreciate over the medium term. Unhedged exposures to EM Asia offer the best risk-adjusted rewards, in our view. Risks to consider: There could be some near-term volatility as worries persist around the uncertain path for future Fed tightening, the potential for increased trade protectionism, economic transition in China, and the robustness of the global economy as a whole. Geopolitical uncertainty also poses risks. CEE & Latam Neutral Positive factors: Brazil exited recession in Q1 2017, whilst Mexico s economy is resilient. We believe Poland, Russia and Hungary offer attractive risk premiums. Risks to consider: Geopolitical tensions are high and unpredictable. We think high local cash rates and sovereign yields in many countries diminish the case for bearing equity risk. Government bonds Asset Class View Movement Rationale Developed Markets (DM) Underweight Rationale of underweight views: Prospective returns still look low relative to competing asset classes. In a bond-unfriendly environment (robust global activity, the risk of cyclical inflationary pressures, and gradual DM central bank policy normalisation), global bond yields could move higher still. Positive factors: Government bonds can still deliver diversification benefits should there be a renewal of economic growth concerns. Also, secular stagnation forces remain (ageing populations, low productivity and investment), and the global pool of safety assets is limited. US Underweight Rationale of underweight views: The US is at the forefront of building inflationary pressures. A more meaningful pick-up in inflation is a key risk scenario. Positive factors: Two-year Treasury yields are above US dividend yields. To us, this means we no longer need to be exposed to unwanted risks in order to reach target income levels. We also believe 10-year Treasuries can benefit from recession fears. This is set against a backdrop of price stability. We hold this position with a positive bias (i.e. close to neutral). UK Underweight Rationale of underweight views: Prospective returns for UK gilts continue to look poor, and we are being penalised for bearing interest-rate risk. Positive factors: Although the BoE has signalled a gradual tightening path, amid downside risks to growth and inflation heading back toward target, monetary policy is likely to remain relatively accommodative. Eurozone Underweight Rationale of underweight views: Similarly, core European bonds are overvalued, in our view. A key risk is the termination of the ECB Asset Purchase Programme this year. Positive factors: Core inflationary pressures in the region remain subdued, which should keep accommodative monetary policy in place for an extended period of time. Japan Underweight Rationale of underweight views: Japanese government bonds (JGBs) are overvalued, in our view. The BoJ has also recently reduced the amount of its JGB purchases and could modify its yield targeting framework. Positive factors: The Yield Curve Control framework should limit volatility and reduce the risk of significantly higher yields in the near term. Emerging markets (EM) Overweight Rationale of overweight views: Most countries offer high prospective returns, especially relative to the opportunity set. Our estimate of the sustainable return on EM currencies reinforces our choice to hold this position unhedged. Risks to consider: A more aggressive than expected tightening of Fed policy and a rapid gain in the US dollar are key risks. Diverging economic and political regimes in the EM universe also mean that being selective is key. Source: HSBC Global Asset Management. All numbers rounded to one decimal place Past performance is not an indication of future returns. 09/08/2018 Investment Monthly 3

4 Corporate bonds Asset Class View Movement Rationale Global investment grade (IG) USD investment grade EUR and GBP investment grade Asia investment grade Global highyield Neutral Neutral Underweight Neutral Neutral Rationale of view change: Prospective returns on IG corporate bonds have improved, with the implied credit risk premium now more generous than before. Positive factors: The macro environment remains supportive for credits implied recession probabilities remain very low. The risk of defaults and downgrades appear limited for now. Risks to consider: Although credit premiums have risen, the margin of safety against negative shocks, such as a deterioration in the data or default outlook, is not large. We still believe we can access growth at a better price through equity exposures. Rationale of view change: Prospective returns on US IG corporate bonds have improved, with the implied credit risk premium now more generous than before. Positive factors: US IG debt looks more attractive to us than European credit. We think carefullyselected US credit may outperform. Risks to consider: The duration of US IG corporate bonds a measure of their sensitivity to shifts in underlying interest rates is historically high, making them vulnerable to a faster pace of Fed tightening, in our view. Rationale of underweight views: EUR IG prospective returns are weighed down by a negative duration risk premium i.e. we are being penalised for bearing interest-rate risk. Positive factors: For the time being, the ECB s corporate bond-buying programme and pledge to reinvest maturing assets for an extended period of time remains supportive. Default rates also remain low. Positive factors: Within the IG universe, the carry offered by Asian credits looks attractive relative to DM. Our measure of the implied credit risk premium is also relatively high. Robust underlying activity in EM Asia and a neutral monetary policy stance in most countries are also supportive. Risks to consider: A more aggressive than expected Fed policy normalisation poses a key risk, particularly for corporates who borrow in US dollars. Risks from rising protectionism cannot be ignored either, while the extent of Chinese leverage remains a long-term issue. Rationale of view change: Prospective returns on HY corporate bonds have improved, with the implied credit risk premium now more generous than before. Positive factors: HY bonds are more exposed to growth than to interest-rate risk. Corporate fundamentals are solid amid robust global economic activity, and defaults are low. We prefer higherrated HY bonds. Risks to consider: Our measures show that we remain better rewarded by equities as a way to benefit from a strong economic backdrop. US HY Neutral Rationale of view change: Prospective returns on US HY corporate bonds have improved, with the implied credit risk premium now more generous than before. Positive factors: Broad-based strength in US economic activity continues to support corporate fundamentals. Tax reforms will also help. Default rates are relatively low. HY bonds also have a shorter effective duration, making them more exposed to growth than to interest-rate risk. Risks to consider: US HY credits remain vulnerable to a deterioration in economic data or the default outlook. A more aggressive Fed tightening cycle is a key risk. Europe HY Underweight Rationale of underweight views: The carry offered by Euro HY is unattractive compared to European equities. The ECB Asset Purchase Programme (APP), which has so far been positive for this asset class, will be terminated by the end of this year. Overall, our measure of prospective riskadjusted returns in EUR HY is consistent with an underweight positioning. Positive factors: The robust eurozone recovery, coupled with spill-over effects from the ECB APP remain supportive. The default outlook also looks benign. Asia HY Neutral Positive factors: The carry offered by Asian High Yield looks attractive to us given the alternatives, with relatively high prospective risk-adjusted returns. Economic momentum is robust and inflationary pressures appear to have mostly stabilised. Risks to consider: A faster pace of Fed monetary policy normalisation poses a key risk, particularly for corporates who borrow in US dollars. Risks from rising protectionism cannot be ignored either, while the extent of Chinese leverage remains a long-term issue. Other Asset Class View Movement Rationale EM agg bond (USD) Neutral Rationale of view change: Prospective returns on EM hard-currency bonds have improved, with the implied credit risk premium on corporate bonds now more generous than before. Positive factors: Investors reach for yield may continue to support EM hard-currency bonds. Risks to consider: The risk of a more hawkish Fed and stronger USD poses a significant risk to USD-denominated debt holdings in the EM universe. USD debt leverage is high in some economies. Gold Neutral Positive factors: Gold futures can offer reasonable diversification benefits to our multi-asset portfolios and have some inflation-hedging characteristics. Risks to consider: Based on our expected returns framework, prospective returns on gold futures look poor today given current market pricing. This is due to the large negative expected roll yield (the cost of renewing futures contracts) and a negative expected spot price return. Source: HSBC Global Asset Management. All numbers rounded to one decimal place Past performance is not an indication of future returns. 09/08/2018 Investment Monthly 4

5 Other commodities Neutral Positive factors: Commodity futures can offer reasonable diversification benefits to our multi-asset portfolios and have some inflation-hedging characteristics. Risks to consider: Based on our expected returns framework, prospective returns on commodity futures look poor today given current market pricing. This is primarily because there is a large negative expected roll yield (the cost of renewing futures contracts). Real estate Neutral Positive factors: At the end of June 2018, global real estate equities offered a dividend yield of 4.0%, 154 basis points above that of wider equities, which is attractive in a low interest rate environment. In the long run, rents are linked to wider economic growth and offer a partial inflation hedge. Based on our outlook for rental growth and dividends, we believe real estate equities are priced to deliver reasonably attractive long-run returns compared to DM government bonds. Risks to consider: Real estate equities focused on retail property are susceptible to the pressures of ecommerce and changing shopping habits, although this is partly offset by strong demand for logistics buildings. A serious escalation in global trade disputes could harm occupier demand generally, particularly for countries heavily reliant on exports. Unexpected rises in interest rates could adversely affect prices in the short term. Brexit continues to cast a shadow on the UK, particularly in relation to Central London offices. Asian assets Asset Class View Movement Rationale EM Asian Fixed Income Asia ex-japan Equities Underweight Overweight China Overweight India Overweight Hong Kong Neutral Singapore Overweight Rationale of underweight views: From a near-term perspective, this asset class is sensitive to US monetary policy. Whilst a gradual interest rate hike cycle in the US is positive for the asset class, Asian bond spreads look particularly tight (178bp for the EMBI Global Asia as at 31 July) than in other regions of the EM space (465bp for the EMBI Global Latin America for example), which reduces their relative attractiveness in the near to medium term. Positive factors to consider: From a long-term perspective, return signals are still positive, backed by relatively sound economic fundamentals, stable inflation and credit quality. Rationale of overweight views: We think Asia ex Japan equities have particularly attractive riskadjusted returns and a reasonable margin of safety in current valuations should a less favourable macro backdrop emerge. Asian earnings growth is strong. Asian currencies are also poised to appreciate in the medium term. Risks to consider: A further rise in US Treasury yields is a key risk, along with DM central bank policy normalisation. Other risks include US protectionist policies; geopolitical events; commodityprice and/or currency volatility; faltering global growth; and renewed concerns about China s growth and financial stability. Rationale of overweight views: Earnings growth is still solid with margin expansion and rising ROE. Valuations are undemanding. Liquidity conditions should improve on monetary easing. Easing deleveraging process/relaxation in regulatory tightening helps credit growth and banks & insurance. Fiscal policy is expansionary with tax cuts and R&D investment and more funding for infrastructure projects. Market structural changes and financial liberalisation are potential longer-term catalysts. Risks to consider: Escalating US-China trade tensions is a key external risk, as well as renewed pressure on capital outflows due to higher US/global rates or intensifying China macro concerns. A setback in supply-side reforms, including financial reform (deleveraging, shadow banking cleanup, proper credit risk pricing, etc.), is another key risk. Balancing often conflicting economic and financial goals is a major policy challenge. The property sector continues to face tight funding conditions. Rationale of overweight views: An ongoing gradual cyclical recovery supports an improvement in earnings. Policy focus on the rural/agriculture sector is positive for near-term consumption (esp. if monsoon performance is good) and the relevant sectors. Policy measures to facilitate the bank NPA resolution process enable a structural improvement in credit culture and quality. The RBI policy is proactive in preserving its inflation-targeting credibility and safeguarding macroeconomic stability. Risks to consider: Macro stability remains under pressure (e.g. a wider current account deficit, the risk of fiscal slippage and inflation risks, etc.). Tightening global and domestic financial conditions, domestic banking sector issues, the adverse terms-of-trade shock from higher oil prices and US protectionist policies pose challenges. Earnings estimate revision trend is still weak. Valuations are not attractive. Pressures on manufacturing profit margins are building from input cost increases. Positive factors: The expansionary FY19 budget is positive for the growth outlook. A recovery in (mainland) tourist inflow and solid domestic consumption thanks to a tight labour market and high asset/housing prices support retail sales. Market liquidity is still abundant. The Hong Kong economy has a strong external balance sheet, high household savings and a healthy banking sector. Risks to consider: Any substantial rise in HIBOR is a headwind for the Hong Kong asset markets and economy. Policy risk remains alive for the property market, amid risks from higher interest rates (effectively with a rise in the prime rate) and supply increases. Rising US-China trade conflicts, China s financial risk contagion, and volatile global financial conditions are risks. Rationale of overweight views: Economic growth is likely to maintain a healthy, albeit softer, pace, with a gradual recovery in retail sales (ex. autos due to policy effects) and a tighter labour market. An expansionary fiscal policy supports growth. EPS growth expectation is higher in Singapore than other ASEAN markets and ROE is improving. The relatively high dividend yield is positive. Risks to consider: Singapore faces the risk of tighter global financial conditions, moderating global demand and trade protectionism, and are sensitive to the USD trend. Domestic liquidity is likely to remain tight amid sluggish deposit growth, firmer loan growth, and a gradual pace of higher SIBOR. The housing market face headwinds of rising mortgage rates/debt and policy cooling measures. Source: HSBC Global Asset Management. All numbers rounded to one decimal place Past performance is not an indication of future returns. 09/08/2018 Investment Monthly 5

6 South Korea Overweight Taiwan Neutral Rationale of overweight views: Export growth ex. shipbuilding still holds up. The potential for reduced North Korea-related geopolitical risk and corporate governance reform create longer-term re-rating potential. The income-led growth policy agenda/tax reform and an expansionary fiscal policy supports domestic demand. Earnings growth remain solid and valuations are attractive. Risks to consider: Labour market headwinds to consumption persist, partly reflecting the impact of the minimum wage policy and corporate restructurings. Regulation weighs on the housing market. Korea is exposed to trade protectionism, slower global demand and geopolitical risks. Corporate income tax hike, labour policy and higher energy prices will likely raise costs and weigh on margins. Positive factors: External demand outlook remains broadly benign, with recent data showing a moderate improvement in tech exports following several months of weak performance. There are new growth drivers in the tech sector such as artificial intelligence, Internet of Things and 5G. The multi-year public infrastructure investment plan begins to roll out. Dividend yield is relatively high. Risks to consider: Escalating US-China trade tensions and any global demand slowdown are major risks, considering Taiwan s heavy involvement in the regional (tech) supply chain. Taiwan s tech sector is facing tough competition from China. Global financial market volatility, geopolitical tensions and rising political and military pressure on Taiwan by China, and any oil shock are risks. Source: HSBC Global Asset Management. All numbers rounded to one decimal place Past performance is not an indication of future returns. 09/08/2018 Investment Monthly 6

7 Corporate bond valuations improve Markets: global equity markets rose in July amid easing trade concerns; Treasuries fell as Fed signalled further rate hikes Global equity markets rose in July, as upbeat corporate earnings results outweighed lingering global trade concerns. Risk appetite was also boosted by China s fiscal and monetary stimulus as well as the US and Europe agreeing on a ceasefire in their ongoing trade dispute In terms of currencies, the Turkish lira fell sharply against the US dollar amid higher than expected inflation data and as the central bank unexpectedly kept interest rates on hold. Asian currencies also declined, with the Chinese yuan underperforming Developed market government bonds finished the month lower (yields rose) as easing global trade tensions resulted in weakened demand for perceived safe-haven assets, whilst Fed Chair Powell signalled continued monetary policy tightening Crude oil prices fell over the month as US President Donald Trump put pressure on Saudi Arabia to ramp up oil output to overcome supply losses from other major producers. Investor concerns over an economic slowdown in China also weighed US: Still robust economic activity; Fed will keep raising rates gradually, for now President Trump threatened to extend tariffs on all Chinese exports to the US. Meanwhile, he agreed with European Commission President Juncker to put the trade dispute on hold, but fell short of discussing auto tariffs in the deal US Q2 GDP expanded by 4.1% qoq annualised. Personal consumption contributed 2.7 percentage points (ppts), following a soft 0.4ppts in Q1, as income tax cuts fed into the economy. Our Nowcast for July is also tracking economic activity of close to 4.0% Multiple housing indicators (new home sales, building permits, etc.) contracted in June. Looking ahead, rising fixed mortgage rates are likely to offset some of the support from income tax cuts and a tightening labour market Amid strong economic data and despite rising trade tensions, Federal Reserve Chair Powell testified before Congress that the Fed would keep gradually raising rates, for now. The next rate hike is likely to come in September Europe: ECB on course to end QE this year; Bank of England likely to hike rates in August Recent eurozone activity indicators suggest growth has stabilised, following a weakening over Q1. Looking ahead, growth is likely to remain robust, although the industrial sector is vulnerable to a softening of global activity and further US tariffs Consistent with the European Central Bank s forward guidance, the recent stabilisation of activity data implies the bank's quantitative easing programme will end this year, with key policy rates remaining on hold "at least through the summer of 2019" UK core inflation unexpectedly fell in June, to 1.9% yoy, whilst June retail sales disappointed. However, the Bank of England may still push ahead with a rate hike in August given a strong labour market and very little spare capacity Asia: Chinese policy easing should help contain risk of sharp slowdown; Bank of Japan downgrades inflation forecasts In China, monetary easing, a slower pace of regulatory tightening and more funding for key local government projects should help to stabilise credit growth and infrastructure investment in China, containing the risk of a sharp growth slowdown The Reserve Bank of India raised interest rates for a second straight meeting in August amid inflation risks. This reduces the urgency for further near-term tightening, as inflation and growth may be gradually peaking and financial conditions remain tight The Bank of Japan downgraded its inflation forecasts for the next three years and introduced forward guidance on policy rates, reiterating monetary policy will remain very accommodative for an extended period of time, but with some greater flexibility Other EM: Turkish economic activity slowing; inflation accelerating in Brazil Our Turkey Nowcast is showing a slowdown in economic activity, averaging just 6.5% annualised in Q2 versus 9.5% in Q1. The central bank kept interest rates unchanged in July despite high inflation The Russian Parliament approved an increase to VAT from 18% to 20%. Against this backdrop, the Central Bank of Russia kept the key rate at 7.25%, but signalled concerns over how strongly the tax measures may affect inflation expectations Similarly, the South African Reserve Bank held policy rates at 6.5% in July and shifted to a more hawkish stance. It stressed upside risks to the inflation outlook and now signalled five rate increases of 25bp by the end of 2020, instead of four previously Inflation in Brazil has accelerated in recent months, albeit due to temporary factors such as the truckers strike which disrupted the economy s supply chain. The central bank is likely to reiterate this view at the August meeting, and leave the Selic rate unchanged at 6.5% Source: HSBC Global Asset Management. All numbers rounded to one decimal place Past performance is not an indication of future returns. 09/08/2018 Investment Monthly 7

8 Market Data MTD 3M 1-year YTD 52-week 52-week Fwd Close Change Change Change Change High Low P/E Equity Indices (% ) (% ) (% ) (% ) (X) World MSCI AC World Index (USD) North America US Dow Jones Industrial Average 25, ,617 21, US S&P 500 Index 2, ,873 2, US NASDAQ Composite Index 7, ,933 6, Canada S&P/TSX Composite Index 16, ,586 14, Europe MSCI AC Europe (USD) Euro STOXX 50 Index 3, ,709 3, UK FTSE 100 Index 7, ,904 6, Germany DAX Index* 12, ,597 11, France CAC-40 Index 5, ,657 4, Spain IBEX 35 Index 9, ,758 9, Asia Pacific MSCI AC Asia Pacific ex Japan (USD) Japan Nikkei-225 Stock Average 22, ,129 19, Australian Stock Exchange 200 6, ,306 5, Hong Kong Hang Seng Index 28, ,484 26, Shanghai Stock Exchange Composite Index 2, ,587 2, Hang Seng China Enterprises Index 11, ,963 10, Taiwan TAIEX Index 11, ,270 10, Korea KOSPI Index 2, ,607 2, India SENSEX 30 Index 37, ,712 31, Indonesia Jakarta Stock Price Index 5, ,693 5, Malaysia Kuala Lumpur Composite Index 1, ,896 1, Philippines Stock Exchange PSE Index 7, ,078 6, Singapore FTSE Straits Times Index 3, ,642 3, Thailand SET Index 1, ,853 1, Latam Argentina Merval Index 29, ,462 20, Brazil Bovespa Index* 79, ,318 65, Chile IPSA Index 5, ,895 4, Colombia COLCAP Index 1, ,598 1, Mexico S&P/BMV IPC Index 49, ,722 44, EEMEA Russia MOEX Index 2, ,379 1, South Africa JSE Index 57, ,777 53, Turkey ISE 100 Index* 96, ,532 88, *Indices expressed as total returns. All others are price returns. 3-month YTD 1-year 3-year 5-year Change Change Change Change Change Equity Indices - Total Return (% ) (% ) (% ) (% ) (% ) Global equities US equities Europe equities Asia Pacific ex Japan equities Japan equities Latam equities Emerging Markets equities All total returns quoted in USD terms and subject to one-day lag. Data sourced from MSCI AC World Total Return Index, MSCI USA Total Return Index, MSCI AC Europe Total Return Index, MSCI AC Asia Pacific ex Japan Total Return Index, MSCI Japan Total Return Index, MSCI Latam Total Return Index and MSCI Emerging Markets Total Return Index. Sources: Bloomberg, HSBC Global Asset Management. Data as at close of business 31 July Past performance is not an indication of future returns. 09/08/2018 Investment Monthly 8

9 Market Data (continued) MTD 3-month 1-year YTD Close Change Change Change Change Bond indices - Total Return (% ) (% ) (% ) (% ) BarCap GlobalAgg (Hedged in USD) JPM EMBI Global BarCap US Corporate Index (USD) 2, BarCap Euro Corporate Index (Eur) BarCap Global High Yield (Hedged in USD) Markit iboxx Asia ex-japan Bond Index (USD) Markit iboxx Asia ex-japan High-Yield Bond Index (USD) Total return includes income from dividends and interest as well as appreciation or depreciation in the price of an asset over the given period End of 3-mths 1-year Year End Bonds Close last mth. Ago Ago 2017 US Treasury yields (%) 3-Month Year Year Year Year Developed market 10-year bond yields (%) Japan UK Germany France Italy Spain End of 3-mths 1-year Year End 52-week 52-week Currencies (vs USD) Latest last mth. Ago Ago 2017 High Low Developed markets EUR/USD GBP/USD CHF/USD CAD JPY AUD NZD Asia HKD CNY INR MYR KRW 1,119 1,115 1,068 1,119 1,067 1,150 1,054 TWD Latam BRL COP 2,889 2,932 2,803 2,986 2,986 3,080 2,685 MXN EEMEA RUB ZAR TRY Latest MTD 3-month 1-year YTD 52-week 52-week Change Change Change Change High Low Commodities (% ) (% ) (% ) (% ) Gold 1, ,366 1,211 Brent Oil WTI Crude Oil R/J CRB Futures Index LME Copper 6, ,348 5,988 Sources: Bloomberg, HSBC Global Asset Management. Data as at close of business 31 July Past performance is not an indication of future returns. 09/08/2018 Investment Monthly 9

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Issued by The Hongkong and Shanghai Banking Corporation Limited Expiry: 1 Feb /08/2018 Investment Monthly 10

11 2018 年 8 月 2 日 滙豐每月專訊 企業債券估值改善 概要 投資企業債券的理據增加 我們對美國投資級別及高收益企業債券的觀點由偏低轉為中性, 導致對環球投資級別及高收益企業債券的觀點亦由偏低轉為中性 我們對美元新興市場債券的觀點亦由偏低轉為中性 環球股市 7 月份上升, 企業業績理想, 抵銷了對環球貿易的持續憂慮 經濟數據強勁, 儘管貿易方面的緊張局勢加劇, 聯儲局主席鮑威爾在作證時指 目前 會維持漸進加息的步伐 近期歐元區的活動指標顯示, 在疲弱的第一季過後, 經濟增長已趨於穩定 歐洲央行仍很可能在年底前終止淨買入債券的計劃 中國方面, 放寬貨幣政策 放慢收緊監管的步伐及增加向地方政府項目提供資金, 應有助抑制經濟增長急速放緩的風險 日本央行下調未來三年的通脹預測, 並重申貨幣政策將在 更長的時期 維持非常寬鬆 環球經濟增長在 2018 年初放緩, 但自此穩步回穩 與此同時, 企業的基本因素仍然穩健, 違約率偏低 然而, 近期我們認為企業債券的估值越趨吸引, 尤其是美國的企業債券 因此, 我們對美國投資級別及高收益企業債券的觀點由偏低轉為中性, 導致我們對環球投資級別債券及高收益企業債券的觀點亦由偏低提升至中性 我們對歐洲同類型債券亦更趨樂觀, 雖則由於相關估值改善的幅度未算太大, 因此我們對其的觀點仍然維持偏低 其他地區方面, 近期新興市場資產的拋售已改善了美元計值新興市場債券的估值, 我們對該等債券的投資觀點亦由偏低上調至中性 我們先前偏向以投資於環球股票及美國國庫券來模仿企業債券的收益 為了平衡本月份觀點轉變所帶來的影響, 我們會減少這方面的偏向 雖然如此, 我們認為環球股票仍然是從強勁的環球經濟環境中得益的較佳方法, 而波幅上升可帶來買入的機會 與此同時, 我們認為美國國庫券仍較其他成熟市場政府債券吸引 ( 尤其兩年期的票據 ), 雖則美國通脹上升仍是這項資產類別的主要風險 股票 政府債券 企業債券及其他 亞洲資產 資產類別 觀點 觀點變動資產類別 觀點 觀點變動 資產類別 觀點觀點變動 資產類別 觀點 觀點變動 環球 偏高 成熟市場 偏低 環球投資級別 中性 新興亞洲固定收益 偏低 美國 中性 美國 偏低 美元投資級別 中性 亞洲日本除外股票 偏高 英國中性 英國偏低 歐元及英鎊投資級別偏低 中國偏高 歐元區偏高 歐元區偏低 亞洲投資級別中性 印度偏高 日本偏高 日本偏低 環球高收益中性香港中性 新興市場偏高 新興市場 ( 本幣 ) 偏高 美國中性新加坡偏高 中 東歐及拉美中性 歐洲偏低 韓國偏高 亞洲 中性 台灣中性 新興市場綜合債券 ( 美元 ) 中性 黃金中性 其他商品中性 房地產中性 本投資分析市場評論由滙豐環球投資管理製作, 就近期經濟環境提供簡單基本的概要, 僅供參考用途 所載之內容只反映製作本文件時之觀點, 並會不時轉變而不另行通知, 而且可能並不反映在滙豐集團其他通訊或策略的意見 本市場傳訊資料不應被讀者視為投資意見或作為出售或購入投資產品的建議, 也不應被視為投資研究 所載之內容並非因應旨在提供獨立投資研究的法定要求而準備, 亦無受到發放此文件前禁止進行交易的約束 閣下必須注意, 投資價值可升亦可跌, 投資者有機會未能取回投資本金 此外, 與成熟市場相比, 新興市場投資涉及較高風險, 而且較為波動 本文件所載之表現屬歷史數據, 過去業績並不代表將來的表現 閣下考慮作出任何投資時, 應尋求專業的意見

12 長線資產類別比重 ( 十二個月以上 ) 長線資產類別比重概覽的觀點基礎和定義 投資觀點根據 2018 年 7 月期間舉行的滙豐環球投資管理資產配置區域會議 滙豐環球投資管理於 2018 年 6 月 29 日計算的長線預期回報預測 我們的投資組合優化過程及實際投資組合比重而定 標誌 : 此資產的觀點獲上調 沒有變動此資產的觀點獲下調 偏低 偏高和中性比重分類, 是在分散投資 典型的多元資產投資組合中應用的概括性資產配置傾向, 反映我們的長線估值訊號 短線周期性觀點以及實際投資組合比重 上述比重參考了環球投資組合 然而, 個別投資組合的比重, 可能因應委託 基準 風險狀況 和個別資產類別在不同地區是否可選以及風險程度而有分別 偏高 意味著, 在一個充份分散投資的典型多元資產投資組合狀況下, 以及相對有關的內部或外部基準, 滙豐環球投資會 ( 或應該會 ) 對該資產類別持正面傾向 偏低 意味著, 在一個充份分散投資的典型多元資產投資組合狀況下, 以及相對有關的內部或外部基準, 滙豐環球投資會 ( 或應該會 ) 對該資產類別持負面傾向 中性 意味著, 在一個充份分散投資的典型多元資產投資組合狀況下, 以及相對有關的內部或外部基準, 滙豐環球投資會 ( 或應該會 ) 對該資產類別沒有特定的負面或正面傾向 環球投資級別企業債券方面, 整體資產類別的偏低 偏高和中性分類, 也是基於在分散投資 典型的多元資產投資組合中應用的概括性資產配置傾向 然而, 美元投資級別企業債券 歐元及英鎊, 以及亞洲投資級別企業債券的觀點, 取決於相對整體環球投資級別企業債券市場的比重 亞洲日本除外股票方面, 整體區域的偏低 偏高和中性分類, 也是基於在分散投資 典型的多元資產投資組合中應用的概括性資產配置傾向 然而, 個別國家的觀點則取決於相對整體亞洲日本除外股票截至 2018 年 7 月 31 日的比重 同樣地, 對新興市場政府債券而言, 整體資產類別的偏低 偏高和中性分類, 也是基於在分散投資 典型的多元資產投資組合中應用的概括性資產配置傾向 然而新興亞洲定息資產的觀點則取決於相對整體新興市場政府債券 ( 硬貨幣 ) 截至 2018 年 7 月 31 日的比重 股票 資產類別 觀點 變動 簡評 環球 美國 偏高 中性 偏高比重的理據:就現時所處的盈利週期而言, 我們計算所得的環球股票風險溢價 ( 與現金相比的額外回報 ) 仍見合理 環球經濟增長仍穩健, 帶動環球股市在長期錄得正回報 整體而言, 依然寬鬆的貨幣政策及財政政策 ( 如有需要 ) 帶來支持, 將在中長期有望抵銷多項負面影響, 包括中國增長放緩 成熟經濟體推行貨幣政策正常化及不少地區的政治不明朗因素 風險因素:股票的隱含風險溢價頗狹窄, 限制了市場吸納不利消息的能力 市場關注環球貿易保護主義 中國經濟狀況, 以及 / 或聯儲局 歐洲央行及日本央行政策正常化速度可能較預期快, 以及政治風險等, 或導致市場波幅不時上升 環球經濟展望顯著和持續走弱亦可為我們的觀點帶來影響 正面因素:儘管市場波幅近期上升, 但企業基本因素仍然強勁, 盈利增長前景穩健 ( 稅務改革或帶來上行風險 ), 美國宏觀經濟環境依然強勁 整體而言, 我們計算的隱含風險溢價 ( 與現金相比的額外回報 ) 仍跟中性觀點吻合 風險因素:鑑於當前所處的經濟週期階段, 稅務改革對本地生產總值增長的刺激力度可能較小 聯儲局進一步收緊政策也會帶來風險 目前情況正進一步靠近導致我們重新評估此市場的股票風險回報是否充分的臨界點 我們也要考慮美國保護主義的風險 ( 尤其是若進一步採取 以牙還牙 行動的情況出現 ) 資料來源 : 滙豐環球投資管理 所有數字四捨五入至一個小數位 過往表現並非未來回報指標 02/08/2018 滙豐每月專訊 2