Asian Equities & Fixed Income Mid-Year Market Outlook
The global COVID-19 vaccine rollout has led some economies to gradually recover during the first half. While some semblance of normalcy returned this year, a changing economic environment also comes with new risks that could affect investors’ appetite for the rest of the year.
Regulatory changes made in recent months have sparked concern in the volatility in sector profitability. In particular China’s reforms on internet and e-commerce, healthcare, property and education, no longer have the same long-term prospects present before. While there has been much worry about the movements of the Chinese government, we view that these reforms are in line with the government’s goal of achieving quality growth, shaping the country’s long-term development.
Nevertheless, we remain cautiously optimistic on China equities. While we continue to favor companies that are riding on the structural growth cycle, we believe that it is critical to be aware of how policy changes can impact individual names. At the same time, it is crucial to be selective in our bottom-up approach and choose quality names, including those that have strong balance sheets and good governance and compliance practices, that will be rewarded in the current macro environment.
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