EQUITY HEAT MAP W9/2023
MARKET RECAP
- Asian markets rose while ASEAN markets mostly corrected. Gains in the Asian markets were led by China/ Hong Kong (+3 to 4%), reversing the downward trend that started after Chinese new year. Investors may want to pay attention to the bright spots in China.
- US and Europe major indices had mostly done well for the week with gains of around 2%.
Bright Spots in China. Two Sessions
- A key measure of Chinese growth marked its fastest expansion in more than a decade in February, with the official manufacturing purchasing managers index (PMI) rising to 52.6 last month from 50.1 in January. The February PMI came ahead of expectations and marked the highest level since April 2021. Services PMI rose from 54.4 to 56.3, pointing to a highest reading since March 2021.
- China’s annual Two Sessions meeting kicked off on 4-5 March, GDP growth goal is set at around 5%, a modest goal vs economists expectation of above 5%, signalling concern of the strength of recovery.
- In history, China markets tend to perform well after the NPC meetings
- Health Care, Industrials, IT and Materials tend to have higher returns as PMIs pick up
US Yields: to infinity and beyond?
- It was not long ago that the market was pricing in rate cuts, leading a strong run in the US bond markets.
- With most part of the treasury yield curve close to or above 4%, the S&P US government & corporate bond index and finished its around the world in 80 days (more accurately.. 62 days)
- Treasury 10-year yields topped 4% for the first time since November, closing at just below 4% for the week. All points on the yield curve closed above 4%, except for 10yr and 30yr.
Cash is king
- Six-month T-bill yields surpass 5% for the first time since 2007.
- The 60/40 portfolio is currently yielding less than six-month T-bills
- This reduces investors appetite for risky assets.
A new record that no one wants
- Headline inflation in the euro zone eased slightly in February (act: 8.5%, exp 8.3%, prev 8.6%) but the core rate rose to a new record of 5.6%. The March increase of 50bps by European Central Bank has already been priced in.
- Short-term interest rates now imply the ECB won’t stop hiking until next year, by which time its deposit rate will have risen to 4%.
- With current 10-year Eurozone Central Government Bond yield of 3.46%, negative bond yield in 2021 looks unreal.
- Huge implication to bond holders and other investors that seek income for their portfolio. .
Disclaimer: The contents of this publication were derived, sourced or reproduced from various sources. Any views and opinions expressed herein may not be representative of my employer’s.
