Harris Fraser |
금융 시장 리포트
19 January, 2022
China – Expect Regulatory Pressure to Ease

Policy uncertainty is a pain point that continues to spook investors, the calendar year return was relatively unsatisfactory. Still, Chinese markets slightly rebounded in the last month of the year, both the Shanghai Composite and CSI 300 Index gained 2.13% (2.26% in US$ terms) and 2.24% (2.38% in US$ terms) respectively over the month of December, whereas the Hang Seng Index continued to slide under the regulatory pressure, shedding 0.33% (0.34% in US$ terms).

Indicators for major industries show a continued slip in the YoY figures, supporting the view that Chinese fundamentals are weaker. The real estate sector continues to be the biggest detractor for the economy, more Chinese developers are waiting for financing conditions to improve to avoid default. According to statements from the authority, ‘stability’ have returned as the policy priority, where the numerous credit events in 2021 was not the intended result. Therefore, if policy pressures shall ease as we expect, the Chinese economy, and especially the hard hit sector, should see better recovery.


Similarly, the tech sector has also experienced much pressure throughout the latter part of 2021. Although regulatory actions impacted the tech space business outlook, we think this trend could change in the New Year. Referencing past regulatory cycles, the tech regulatory cycle could be nearing its end. Signals coming out from the Chinese authorities have also brought hope that there will more regulatory loosening in 2022. With the pandemic likely under control, and anticipating fiscal, monetary, and regulatory loosening, we are positive on the Chinese market in 2022.
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금융 시장 리포트
18 January, 2022
US – Positive on Growth

US markets rebounded with thin trading during holiday season. Early reports have seemingly concluded that the Omicron variant could pose less of a concern, lifting market sentiment. Over the month of December, all 3 equity indices posted gains, the NASDAQ, the S&P 500, and the Dow gained 0.69%, 4.36%, and 5.38%, with the latter 2 setting new record highs during the month.

At the time of writing, Omicron is the dominant strain in the US, helped by its high transmissibility which exceeds that of the Delta variant. The good news is early data from South Africa showed limited impact on the healthcare system, which was supportive of global financial markets, as it ensures limited disruption to the economy with no lockdowns and restrictions imposed. In the New Year, we expect the global economic recovery to slow down, as the low base effect fades out in 2021, but the economic growth should still remain above the long term trend.


With inflation remaining at an elevated level, rates are expected to go higher, with the Fed expressing desire to tighten monetary policy to rein in inflation. There are opinions that the rise in rates could impact growth sectors disproportionally, but long term rates have actually stayed relatively stable, the volatility in the sector is more likely due to profit taking rather than an actual impact on the company prospects. Looking forward, we are still positive on the US equity market, and expect growth stocks to outperform amid slower economic growth.
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Lawrence Cho

Chief Strategy Officer

Lawrence Cho is the Chief Strategy Officer of Harris Fraser Group, responsible for integrating the Group's rich resources to provide wealth management solutions for individuals, families and corporations. With over 20 years of experience in business development, having established marketing and operations teams in different locales including Beijing, Shanghai, Guangzhou, Shenzhen, and Taiwan alike in the meantime, Mr Cho had made his mark in the Greater China region.

In addition to wealth management, Mr. Cho also gained extensive experience in a wide range of industries including manufacturing, information technology, e-commerce, international trade, and cultural industries. His impressive cross-industry background has given him a broader perspective and deeper understanding of the market. Furthermore, Mr. Cho has acquired extensive executive and management experience during his tenor as the Operations Director of a listed company in Hong Kong and the General Manager of China business in a Fortune 500 company.
 
Prior to joining Harris Fraser, Mr. Cho was the General Manager of a China based insurance brokerage in Hong Kong, wholly responsible for all operations of the company. His unique industry know-how kept him abreast of the latest insurance, investment, trust and global real estate solutions in the market.

In recent years, he has expanded the group business to the immigration space in response to local demand, establishing services covering family-centric immigration planning, property investment, overseas education, tax planning for families in both Hong Kong and offshore, as well as legacy planning, spearheading the Group’s transition into a comprehensive wealth management solutions provider across platforms, identities and geographies.

금융 시장 리포트
14 January, 2022
Weekly Insight January 14

Weekly Insight January 14

  usaUS

The US inflation rate hit a near 40-year high and the hawkish comments by Federal Reserve Chairman Jerome Powell have heightened market concerns about accelerating interest rate hikes. Uncertainty has weighed on US stocks, with the S&P and Dow down 0.79% and 0.34% respectively over the past five days ending Thursday. The US CPI rose 7% YoY in December last year, the highest jump in 39 years. This has increased market expectations for a rate hike in March, with the probability of a rate hike in March rising to 90%, according to Bloomberg interest rate futures data. Earlier, Chairman Powell said that in order to curb the worsening inflation, the Fed could raise interest rates more often if necessary, and that the tapering would be carried out faster and earlier than it did in previous cycles.


On the pandemic front, studies have shown that T-cells produced after a common cold can also fight off the coronavirus. Despite this, the spread of the new Omicron variant continues to accelerate. According to the World Health Organisation, half of the European population will be infected with the Omicron variant in the next few weeks. In the face of the rapid spread of the pandemic, the World Bank has lowered its global growth forecast for 2022 from 4.3% to 4.1%. Subsequently, the Managing Director of the International Monetary Fund (IMF) said that the world would face more uncertainty this year in light of the slowing recovery, inflation, and supply chain issues. Next week, all eyes will be on the Federal Reserve's interest rate meeting on 26 January and the latest developments of the global pandemic.

 

euroEurope

European equities had a mixed week, with the UK FTSE 100 index gaining 1.52% over the past five days ending Thursday, while Germany's DAX and France's CAC fell by 0.13% and 0.67% respectively. The Eurozone CPI rose 5% YoY in December last year, a record high since 1991. The market is concerned about inflation in the region, with Bundesbank President Joachim Nagel saying that the current inflation outlook is still highly uncertain, and that the central bank may need to adjust the monetary policy if inflation exceeds expectations. As for the policy rates, the ECB's chief economist said it was very unlikely that the bank would raise interest rates in 2022. Next week, the Eurozone will release its ZEW survey expectations for January, while the UK will release its CPI for December.

 

chinaChina

The A-share and Hong Kong stock markets moved in opposite directions this week, with the CSI 300 Index fell 1.98% over the week, while the Hang Seng Index rose 3.79%. Inflation data in China eased, with the PPI and CPI up by 10.3% and 1.5% YoY in December, down from 12.9% and 2.3% respectively. As for aggregate financing and new RMB loans in December, both recorded declines from the previous values to RMB2.37 trillion and RMB1.13 trillion respectively. RMB-denominated exports improved, the December figure rose 17.3% YoY, up from last month’s 16.6%. Next week, China will release GDP figures for both 2021 Q4 and the full year, as well as fixed investment, industrial production, and retail sales data.

 

 

 

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금융 시장 리포트
7 January, 2022
Weekly Insight January 7

Weekly Insight January 7

  usaUS

Global equities got off to a poor start in the New Year, the US market fell in line, the S&P 500 was down 1.47% over the 5 days ending Thursday, the Dow shed 0.44%, and the technology-heavy NASDAQ lost 4.2%. The decline in the US market was attributed to signals from the US Federal Reserve to speed up the “tapering" process. The released Fed December minutes indicated that interest rates may be raised earlier than expected, and subsequent tapering of the balance sheet is considered. Later, St. Louis Fed President Bullard said the Fed could start raising interest rates as early as March, and then it could start trimming its balance sheet. According to Bloomberg interest rate futures data, the probability of a rate hike in March rose to nearly 80%, and the market is worried that the accelerated pace of rate hikes may put pressure on the economy. The VIX index, a reflection of market fears, rose to 21.06.


On the economic front, the number of initial jobless claims rose in the US, but was still close to a record low; while the number of US ADP jobs added in December was the highest in seven months. Nonetheless, the ISM Manufacturing and Services indices were 58.7 and 62.0 respectively in December, both lower than the previous reading and missed market expectations, reflecting weakening economic activity. Next week, Hearings on the re-election of US Federal Reserve Chairman Jerome Powell are scheduled for 11 January, while hearings on the nomination of Lael Brainard as Vice Chairman will also be held on 13 January. In addition, the US will release CPI, retail sales, University of Michigan market sentiment data, and the Fed will publish the latest Beige book.

 

euroEurope

European equities had a better run than the US, with the FTSE 100 up 0.89%, Germany's DAX up 1.05%, and France's CAC up 1.35% in the first four days of 2022. European benchmark gas prices for next month's deliveries rose by 20% at one point due to a reduction in gas deliveries from a key Russian pipeline through Ukraine. In addition to gas prices, markets were also concerned about inflation in Europe, with Germany reporting a 5.3% YoY figure for December CPI, higher than both market expectations and the previous reading. ECB Governing Council member Martins Kazaks said the bank would take action if the inflation outlook worsened. Another member of the Governing Council, Francois Villeroy de Galhau, expects inflation in the Eurozone to be nearing its peak. Next week, the Eurozone unemployment rate and the Sentix investor confidence index will be released.

 

chinaChina

Hong Kong and Mainland equity markets diverged heading into 2022, with the CSI 300 Index falling in recent days, 2.39% lower over the week, whereas the HSI rebounded on Friday, reversing its weekly weakness and rising 0.33% over the week. On the data front, the Caixin China Manufacturing and Services PMIs for December were 50.9 and 53.1 respectively, both improving over the November figures. Premier Li Keqiang called for greater tax and fee cuts, as well as special support for the service sector and other areas severely hit by the epidemic, to ensure steady economic growth in the first quarter. China will release CPI and PPI figures for December.

 

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금융 시장 리포트
31 December, 2021
Fixed income – Be Mindful of Duration and Credit Quality

With the numerous global central banks expecting that inflation would be here to stay, monetary tightening is a foregone consensus, markets continue to price in the impacts of expected rate hikes. Over the month of November, Bloomberg Barclays Global Aggregate, US High Yields, and Emerging Markets US Dollar Bonds were down 0.29%, 0.97%, and 1.07% respectively, while US Investment Grades still managed to edge 0.06% higher.

The latest inflation data in both the US and Europe remained far above the long term target, supply chain disruptions could be here to stay for an extended period. Henceforth, driving the need for global central bank action, further tightening is expected. At the time of writing, interest rate futures showed that markets are now pricing in 2-3 rate hikes for the Fed in 2022, other central banks apart from the ECB and the BoJ are also expected to walk on the same path, so as to stem the rapidly surging inflation.
This makes for a difficult case for investing in fixed income. With future rate hikes expected, the current downside risk in form of interest rate risk increases. If one does need to invest in the fixed income market, we continue to hold our ‘high yield over investment grade’ view, but investors would need to pay attention to 2 things. Duration should be minimised, so as to reduce interest rate risk. Equally important is the credit quality, as tighter liquidity conditions, dialled down fiscal stimuli, and a slowing economy all pose as a risk to weaker companies.
 

금융 시장 리포트
30 December, 2021
Japan – The Border Closes once Again

The Japan market fell back in line with global markets over the month of November. As with other global markets, the fear of the new Omicron variant sent the market falling towards the end of the month. The Nikkei 225 was 3.71% lower (2.87% in US$ terms), while the TOPIX was also 3.64% down (2.80% in US$ terms).

The Japanese economy remains mixed, though the latest GDP growth reading for Q3 shrunk more than market expected, but PMIs have improved, which could support the idea of the Japanese economy catching up with other DM economies. Another data point with could support the Japan market is the local inflationary environment, the latest figures continue to show limited inflation in Japan, a stark contrast when compared to the rest of the world. This could allow the Bank of Japan to keep the current accommodative monetary policy in place for a longer period, supporting equity valuations.
However, the Japan market was shaken by the unexpected resurgence of COVID. With border closures ordered, original recovery drivers from travel and services will likely be delayed once again. Even though the LDP led government have rolled out some fiscal stimulus earlier, there are no solid signs of more stimuli down the line. Henceforth, our Japanese market outlook stay conservative, short term headwinds remain before we have a better understanding of the new COVID variant. We will stay neutral on the Japan market as we expect pandemic fears to be offset by the loose monetary policy.
 

금융 시장 리포트
28 December, 2021
EM – Sustained Risk Factors

Flurry of negative news hit the market, the continued inflation and the resurgence of the pandemic in particular were big pain points, which affects the EM outlook. Over the month of November, EM equities fell in line with global markets, MSCI emerging markets index lost 4.14%.

The short term outlook remains depressed, the headwinds which were in place over the year have not dissipated, with certain aspects even worsening. The pandemic became the foremost issue in the market, large number of mutations found in the new strain resulted in more uncertainty surrounding its infectiousness and severity, with more concerned over its ability to evade the vaccine. Given EM’s overall lower vaccination and weaker infrastructure, the virus could cause more extensive damage in EM economies, have the possible subsequent outbreak not been contained.


The resurgence of the pandemic also increased the risk of sustained high inflation. With the more stringent measures in place to control the spread of the disease, supply chain disruptions could linger, which in turn bumps up the currently high inflation. At the same time, tightening m2onetary policy in the US materialised, the Dollar is expected to strengthen, and EM economies could see pressure ahead in form of hiking rates and capital outflows. We continue to hold a conservative outlook for EM equities in the short term before the dust over the Omicron variant settles, by then one could consider geographies with better pandemic control, as those markets could possibly see recovery further ahead in the New Year.
 

금융 시장 리포트
24 December, 2021
Europe – Concerns over Omicron and Inflation

Anticipation of the supply chains disruptions resolving gave a boost to the market. However, the unexpected resurgence of COVID in form of the new highly mutated Omicron variant, together with the rising inflation, STOXX 600 index fell significantly towards the end of the month, losing 2.64% (4.56% in US$ terms) over the month of November.

Economic fundamentals remain positive, yet inflation stays strong with the latest YoY figure of 4.9%, which was the highest reading in recent years. Contrary to other global central banks, the ECB has remained unwavering on their ‘transitionary inflation’ claim, pledging to keep the Eurozone monetary policy accommodative as the economy recovers, which should provide further support to the market. However, this also poses a risk if the supply chain troubles and the energy crisis remain in place, as an extended period of high inflation could be harmful to the economy.
As for the pandemic, several European countries have reinitiated lockdown measures just as infection numbers climb higher and a new virus strain emerges, this could hit consumer sentiment which impacts the local economic growth. The resurgence in the global epidemic could extend the current higher inflation, by disrupting more supply chains, potentially forcing the ECB to tighten monetary policy at an undesirable time, further hitting the equity market. In the short term, more headwinds are present, and we suggest investors to exercise caution as the potential impacts of the Omicron variant is being investigated by the scientific community.
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금융 시장 리포트
23 December, 2021
China – Expect Improving Outlook

Continued headwinds are present in the Chinese market, market sentiment is still affected by the policy uncertainty. The market had limited reaction to the rise of the new variant, allowing the Shanghai Composite to record a gain of 0.47% (1.12% in US$ terms) over the month of November, the CSI 300 index lost 1.56% (0.93% in US$ terms), while the Hang Seng Index saw large losses of 7.49% (7.71% in US$ terms) dragged down by the Chinese tech giants.

The Chinese economy has remained weaker, with the Caixin manufacturing PMI missing expectations and falling into the contraction zone. More importantly, policy uncertainty is still a wildcard for investors. The real estate market had borne the brunt of the regulatory action, with a continued stream of defaults in the market. Referencing the latest statements from relevant authorities, we expect incremental loosening in the credit market for the real estate sector, which could hopefully signal recovery for one of the most important pillars of economy in China.
On the other hand, tech giants in China continued to see regulatory upheaval surrounding the sector and the stock price suffered. Considering that previous regulatory cycles tend to be over in a year, markets are likely watching closely if this would be the case, as the cheaper valuation in the sector could be a market entry opportunity. Overall, the China market is blessed with its insulation from the global pandemic, with the normalisation of the monetary and fiscal landscape, we expect an orderly recovery in the Chinese economy, which should be positive for the equity market outlook in the New Year.
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