HSBC Private Bank CIO Asia Fan Cheuk Wan: USD Rally Ends & Bearish, China to Grow 5% & Lead Asia Growth Acceleration with Overweight on Equities in Mainland China, Hong Kong & Asia, Overweight Investment Grade Bonds
3rd February 2023 | Hong Kong
Expert Comment – HSBC Private Bank Chief Investment Officer Asia Fan Cheuk Wan on United States Fed rate hike impact on USD, Bonds & Equities: “For the US dollar, the slowing rate hikes are a signal that the dollar rally is behind us, leaving the currency to underperform … … We expect China’s growth recovery back to 5% this year will lead Asia’s growth acceleration, supporting our overweight position on mainland Chinese, Hong Kong and Asian equities.” Fan Cheuk Wan on Bonds: “The imminent end of the Fed rate hike cycle and easing inflation is clearly positive for bonds investors, and we maintain our overweight stance on investment grade DM, Asian and EM corporate bonds.” HSBC Global Private Banking: The US rate hike cycle is approaching an end following the slower 25 basis points rate hike by the Federal Reserve on 1st February 2023. It highlights peaking interest rates and easing inflation will create a favourable investment environment for bonds investors. Fan Cheuk Wan is HSBC Global Private Banking & Wealth Chief Investment Officer, Asia. See full commentary below | Read: HSBC Private Bank Investment Outlook 2023 – GDP to Grow 1.8% in 2023, Asia to Grow 4.5%, Interest Rates at 5% in 2023 & 2024, Overweight Fixed Income & Alternatives, Mildly Underweight Equities
“ USD Rally Ends & Bearish, China to Grow 5% & Lead Asia Growth Acceleration with Overweight on Equities in Mainland China, Hong Kong & Asia, Overweight Investment Grade Bonds “
HSBC Private Bank CIO Asia Fan Cheuk Wan: USD Rally Ends & Bearish, China to Grow 5% & Lead Asia Growth Acceleration with Overweight on Equities in Mainland China, Hong Kong & Asia, Overweight Investment Grade Bonds
HSBC Private Bank Chief Investment Officer Asia Fan Cheuk Wan on United States Fed rate hike impact on USD, Bonds & Equities. Fan Cheuk Wan is HSBC Global Private Banking & Wealth Chief Investment Officer, Asia.
Fed will hike once more by 25 basis points in March 2023
Fan Cheuk Wan: We forecast the Fed will hike once more by 25 basis points in March, lifting the federal funds rate target range to 4.75-5.0% and then keep it there throughout 2023. As the FOMC continues to view inflation as elevated and stays concerned about wage growth, we don’t expect any rate cuts until Q2 2024 when the Fed is expected to lower rates by 25 basis points, followed by another rate cut by 25 basis points in Q3 2024.
Despite repeated assertions that the ‘job is not done’, the FOMC provided plenty of data points that suggest they may be nearing the end of the tightening cycle. The Fed talked about signs of a slowing economy and falling goods prices, while Chair Powell expressed his view that rental costs should start to plateau soon.
Overweight on investment grade DM, Asian & EM corporate bonds. Overweight on US stocks & neutral stance on global equities
Fan Cheuk Wan: The imminent end of the Fed rate hike cycle and easing inflation is clearly positive for bonds investors, and we maintain our overweight stance on investment grade DM, Asian and EM corporate bonds. For equity investors, easing US inflation, resilient labour market and cheaper valuations support our mild overweight on US stocks and neutral stance on global equities.
USD rally is behind us & to underperform. China’s growth recovery back to 5% in 2023 & Overweight position on Mainland Chinese, Hong Kong & Asian equities
Fan Cheuk Wan: For the US dollar, the slowing rate hikes are a signal that the dollar rally is behind us, leaving the currency to underperform against other developed and Asian currencies when the global economy shows further signs of reaching a bottom while inflationary fears soften further. We have turned bearish on the US dollar due to improved global risk appetite driven by China’s faster-than-expected reopening. We expect China’s growth recovery back to 5% this year will lead Asia’s growth acceleration, supporting our overweight position on mainland Chinese, Hong Kong and Asian equities.
Read: HSBC Private Bank Investment Outlook 2023 – GDP to Grow 1.8% in 2023, Asia to Grow 4.5%, Interest Rates at 5% in 2023 & 2024, Overweight Fixed Income & Alternatives, Mildly Underweight Equities
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