Market outlook: China equities & fixed income

Multi-asset perspective

14 Jul 2020
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COVID-19 pandemic impacted economies around the world at different levels. Compared to other countries, China‘s anti-pandemic measures saw better progress, and is one of the countries in the phase of gradual recovery. We remain confident in the fundamental, long-term changes playing out in China for three reasons.

Under the current macroeconomic backdrop, we favor Chinese High Yield bonds among credits. It provides attractive yield while the default rate is still on the lower end of the spectrum. As for onshore China government bonds, as an risk off asset, there is an even more appealing case given its relative attractiveness to international investors

The pace of global demand recovery will impact China's economy. We remain cautious and hold a neutral view on Chinese equity. Overall, onshore equity is still more favorable than offshore equity.

Under the backdrop of COVID-19 pandemic, we'd like to remind investors that the Chinese economy is undergoing significant regime changes. By developing a large middle-class, technological advancements, demographic changes, and the opening up of the financial markets, investors need to have the flexibility to take advantage of new asset classes and economic themes as they emerge.

We believe a risk-aware balanced investment approach allows investors to access Chinese growth and income with less than half the volatility of the equity markets.


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