- Equities: Property crisis amid an economic slowdown heightens investors’ expectation for more aggressive action from PBOC to stabilise the economy
- Credit: Rates volatility to persist as strong fiscal stimulus runs at odds to Fed’s monetary tightening. 3-5Y remains duration sweet spot to avoid excessive duration risks
- FX: DXY and its components ranged from converging monetary policy stances; Downside bias for GBP/USD within its 3- month range between 1.25 and 1.28
- Rates: DM rates facing uncertainties as market participants struggled to find appropriate pricing; We expect Fed to cut in mid-year and deliver four cuts in 2024
- The Week Ahead: Keep a lookout for US Change in Nonfarm Payrolls; China CPI Number
Related insights_tr
Chinese equities rose on optimism of stronger stimulus from PBOC. China’s economy continued to show signs of slowing growth where the February official manufacturing Purchasing Managers’ Index (PMI) number remained in contractionary territory at 49.1, dipping below 49.2 reported in the previous month. Additionally, according to China Real Estate Information Corp (CREIC), China’s top 100 developers saw property sales decline for the tenth consecutive month, plummeting 60% y/y in February. This property crisis amid an economic slowdown has heightened investors’ expectations for more aggressive policy supports from the People’s Bank of China (PBOC) to stabilise the economy. The SHCOM and CSI300 gained 0.7% and 1.4% respectively for the week.
China’s two sessions to dominate sentiments for the next two weeks. The two sessions which commence today (4 Mar), refer to the concurrent annual meetings held by China’s two main political bodies, the National People’s Congress (NPC) and the National Committee of the Chinese People’s Political Consultative Conference (CPPCC), focusing on China’s policy framework and plans moving forward. Apart from the stimulus measures, another key indicator would be investors’ attention to the gross domestic product (GDP) growth target. Currently, market is expecting a GDP growth target of 4.6% in 2024.
Topic in focus: US Equities – Solid end to earnings season. US equities continue their stellar run in 2024 with both the NASDAQ composite and S&P 500 index reaching record highs late last week (ended 1 Mar). This is in large part due to the current earnings season, which is concluding on a high; 492 out of 500 companies have reported earnings and 74% of them posted beats on quarterly earnings, above the average beat rate of 67% (since 1994). On a sectoral basis, Technology stands out as having the highest positive earnings surprise at 90%, buoyed by the wave of AI-related growth opportunities. Another stand-out sector is Consumer Discretionary, which notched an 82% positive earnings surprise.
On the back of this earnings season, we advocate investors stick with quality and invest in sector leaders with wide economic moats. At the same time, sectoral diversification is a must; while it is crucial to have meaningful exposure to Big Tech and the Magnificent 7 given their robust earnings growth, it is also important to be present in other sectors as profit growth broadens out. Within the ex-Tech space, we have preference for Quiet Luxury plays within the Consumer Discretionary sector and select opportunities within Healthcare that benefit from secular trends such as ageing demographics and the rise of obesity and lifestyle diseases.
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