Harris Fraser Group collected three trophies from iFAST Wealth Advisers Awards 2020. We are proud to receive the iFAST Wealth Advisers Award 2020 - Best Discretionary Portfolio Manager (Bonds).  Our consultants Fannie Lam and Edmond Mak both won their Individual Advisor Awards as well, we thank you for the industry recognition and sending our warmest congratulations to all winners!

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The 2019-20 Good MPF employer award is organized by the MPFA for six consecutive years since 2015. This year, Harris Fraser is honored to receive the awards for "Good MPF Employer Award", "e-Contribution Award" and "MPF Support Award", as being recognized for the commitments to enhancing the retirement benefits of the employees.
The Good MPF Employer Award aims to not only cultivate employers’ responsibility under the law, but also encourage employers’ efforts to further enhance the retirement protection of their employees.

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United States

Despite deteriorating Sino-US relations, the US equity markets remains optimistic, extending the bull run over the week. Over the past 5 days ending Thursday, the S&P 500 rose 0.36%, while the NASDAQ surged 2.01% and briefly hit a record high of 11283.62, driven by the strong performance of Big Tech. The current epidemic remains severe and uncertainties remain, the latest US initial jobless claims figure once again exceeded the 1 million mark. On a side note, US elections are scheduled for November 2020. With Biden officially announcing candidacy, markets will keep a close eye on the latest developments, which should set the tone for the economy and financial markets in the coming 4 years. Next week, the US will announce the August figures for the Conference Board consumer confidence index and the University of Michigan consumer sentiment index.

Europe

European equities had a relatively weak recent performance. Over the past five trading days ending Thursday, the UK, French, and German stock markets fell 2.79%, 2.60%, and 1.26% respectively. The market remained concerned about the voting in Belarus. EU leaders have stopped calling for new elections in the country, but reiterated that they would not accept the results of the August 9th voting. In terms of economic data, the Eurozone Manufacturing Managers’ Index in August came in at 51.7, which is slightly lower than both 51.8 from the previous month, and the market expectation of 52.7. In addition, the final value of the Eurozone Consumer Price Index (CPI) in July was revised down to -0.4%, while the YoY increase remained at 0.4%. Germany will announce the August IFO forecast and August economic confidence index next week.

China

The Shanghai and Shenzhen stock markets remained relatively volatile. Over the week, the CSI 300 Index gained 0.30%; while the Heng Seng Index saw a slight correction and fell 0.27% over the same period. Earlier, the Ministry of Commerce of China stated that it expects the Chinese trade and services industry to face a difficult and complex macro environment in the second half of the year, mainly due to shrinking international demand. The news adversely affected the positive market sentiment, reversing the Shanghai Composite’s four-day rally. In addition, the People's Bank of China announced the LPR interest rate, the one-year and five-year interest rates remained unchanged as markets expected. Chinese industrial profits data in July will be released next week.

The covid epidemic in Japan remains relatively uncontained, with confirmed cases finally present in every single prefecture. Virus hotspots in various metropolitan areas contributed to the sustained transmission in the country, Tokyo and Osaka reported record infection figures over the month. Despite the virus seemingly having a comeback, the Abe-led government saw no need for reinstating the nationwide state of emergency, only reemphasizing the importance of social distancing and taking care of the groups at risk.

Although global vaccine efforts seem to have yielded positive results, it is still questionable if there will be sufficient vaccinations by summer 2021, casting doubt over whether the delayed Olympics could still be held as scheduled. The tourism and airline industry are also expected to suffer lasting damage from the epidemic as the human behaviour changes permanently. Together these negative factors put a further dent to the struggling economy, weakened growth prospects makes the Japanese market a less attractive investment.

That said, markets have seemingly largely ignored the potential impacts of the epidemic, as countries are resuming normal activities with less restrictions and lockdowns. With economic indicators implying a recovery from the fallouts of the epidemic, the MSCI Emerging Markets Index surged and gained 8.42% in July.

With the extended quantitative easing having no end in sight, we expect excess liquidity to further flow from USD assets to non-USD assets, which provides an upward driving force for emerging markets, in particular emerging Asian markets. Among them, we would focus on the Vietnam market. The frontier market recorded a hefty drop at the end of July, as markets were concerned over the spike in covid cases, after over hundred days without locally transmitted cases. However, we see the drop more like a market overreaction than anything.

With a timely reaction to the situation, we are relatively confident that Vietnam will not see the situation go out of control. In addition, despite the global economic slowdown, the economic indicators in the country recovered to pre-epidemic levels, we find Vietnam’s fundamentals rather solid. This is further bolstered by the Sino-US geopolitical tensions, which benefits the country as the production lines shuffle. IMF sees the country’s economy growing 2.7% this year and returning to 7% next, the sharp fall in Vietnam equities is likely an opportunity for a great upside potential.

One of the longest EU leaders’ summit concluded in late July, and the divergent leaders compromised in the end, clearing the EUR 750 billion Recovery Fund for the European Parliament’s approval with revised terms: 390 billion in grants and 360 billion in loans. This was the first liability pooling under the EU, which is a big step forward to a more connected Europe. However, the fundamental conflicts between the states throughout the summit could prove to be an issue in the future.

As for Brexit, both sides remain miles apart on key issues, possibly implying there will be no trade deals before the upcoming deadline at the end of September. Although EU’s chief Brexit negotiator Michael Barnier mentioned that the EU intended to keep a mutually beneficial relationship with the UK even after the divorce, European corporations already took a no-deal Brexit as given and are planning accordingly. With the massive uncertainty both politically and economically, European markets remain a less attractive investment in the short to mid-term.

With foreign direct investment reducing in China, and trade and exports also constituting a smaller part of the Chinese GDP, the rise of de-globalisation could cause lasting damage to the Chinese economy. According to the latest communication from the Chinese politburo, apart from the ‘six stabilities’ and ‘six guarantees’ emphasized since the outbreak of the epidemic, the Chinese leadership is considering prioritising self-reliance and domestic growth, under the big banner of ‘Double Circulation’ led by the domestic economic cycle. Simply put, the politburo determined that it would be better for China to develop its domestic market in a deeper manner for the long term.

As various economic indicators in China continued to improve, it would be an opportunity to jump on the growth train. Considering the government’s emphasis on the domestic market, prioritizing technological research and reducing reliance on foreign imports, relevant sectors in China should continue to see much growth with governmental help. Therefore, we have a stronger conviction to stay bullish on the new economy sector, eyeing on better upside potential in the mid to long-term.

Vaccine optimism and stimulus expectations were the 2 main driving forces behind the surging markets. The positive progress in various vaccine developments drove anticipation that the global economy could return to normal at a sooner date than originally expected; additional fiscal stimulus is also expected to give a boost to the somewhat struggling economy. To add on that, US President Donald Trump mentioned that the White House is considering a possible payroll tax suspension, further boosting market optimism.

The gradual recovery of economic indicators, with all major PMIs rising to 50 or above, suggests a potential bottom in the economic downturn. In particular, we have noticed that the earnings forecast for both the tech and healthcare sectors began to rebound after the earlier downward revision. Although there might be slight corrections in the short term with the valuations still on the higher end, with surprisingly good quarterly results and a lifted outlook, we continue to stay bullish on these sectors in the long term.

The Bloomberg Barclays Global Aggregate Bond Index were up 3.19%, US Investment Grades gained 3.25%, while Emerging Markets US dollar Bonds and US High-yield bonds also rose 3.12% and 4.69% respectively.

Despite the second wave covid crisis regaining traction across multiple countries, concerns over the epidemic continue to fade out of the spotlight as various economic indicators improve, and markets look forward to the much-anticipated v-shaped recovery as vaccine hopes go high. Corporate confidence improved, and credit markets seemingly forgot about the ongoing fiscal support from the governments that keeps various corporations afloat, which might be a concerning risk factor if one were to invest blindly.

Even though credit markets have generally improved, Fitch ratings have warned of a 5% default rate in high yield bonds over the year, underpinning the heightened innate risks in the credit market; With market optimism running high, investors might also want to seek hedging against the heated market. In both cases, selection is still very important. Avoid issuers from sectors expected to suffer lasting damage from the covid fallout, and stay away from emphasising on the past financial records, only pick issuers with solid financials unaffected by the pandemic.

US

The number of covid cases exceeded 20.9 million globally, of which the United States accounts for more than a quarter of total cases. Despite the serious epidemic situation, the US economic data seems to indicate a strengthening local recovery momentum. The latest number of new jobless claims has fallen below the 1 million mark for the first time since the start of the outbreak. The US stock market remains in an upward trend, the Dow and the S&P 500 index rose 1.86% and 0.72% respectively over the past five trading days ending Thursday, while the NASDAQ fell 0.59%. Russia announced registry of its first COVID-19 vaccine. While the market remains hopeful that the vaccine could help control the epidemic, there are also worries that the vaccine's usage may restrict the current dovish policies of global central banks. Regarding Sino-US trade relations, it was reported that senior officials of both countries will evaluate the implementation of the first phase trade deal around 15^th August.  As for spot gold, while it did briefly hit a record high, gold prices subsequently plummeted on August 11, setting a record for the largest single day decline over the past seven years. At the time of writing, spot gold sits at $1948 per ounce. Next week, the United States will release the minutes of the Fed July interest rate meeting.

Europe

The latest focus in Europe remains on the Brexit talks, markets are still speculating whether the UK and EU can reach an agreement before the September deadline. Positive news and data continue to pour in, supporting European equities, the UK, French, and German indexes rose between 2.63% and 3.22% over the past 5 trading days ending Thursday, outperforming global markets. After the UK Prime Minister Boris Johnson and Irish Prime Minister Micheál Martin met on Friday, both expressed optimism about a zero-tariff trade agreement between the UK and EU. Next week, the Eurozone will announce the initial value of the August manufacturing PMI and the finalised July CPI.

China

Over the past week, the margin trading balance growth has slowed down, resulting in weaker performances in both the Shanghai and Shenzhen stock markets. The CSI 300 Index fell slightly by 0.07% over the week, while the Hong Kong equities had a better week, the Hang Seng Index gained 2.66% over the same period. In terms of economic data, China's industrial production maintained a positive growth of 4.8% YoY in July; retail sales were weaker, falling 1.1% YoY over the same period, but the decline was less severe than the previous month; the YTD figure in July fixed investment ex rural areas also saw improvement over previous months.  China will announce the LPR (Loan Prime Rate) next week, market expects both the 1-year and 5-year rates to remain unchanged.