- A soft-landing looks increasingly distant and we see a higher risk of a US recession. Recent banking turmoil should lead to further credit tightening and economic drag which should manifest in 2H23.
- A recession risk looks underpriced. We expect further downside as a recession materialises. We believe it is prudent to stay defensive and maintain our preference for bonds over equities.
- Our equity views have not changed. For equities, we continue to favour Japanese equities. The rally in Asian stocks has reignited interest in the region, but we remain cautious and maintain our neutral view.
- For fixed income, we maintain our preference for high-quality and short-duration bonds. We caution investors from buying into the Asian high-yield rally as we believe it is unsustainable and risks remain prevalent in the China property sector.
The recession drumbeat grows louder
Chart 1: Leading indicators are already pointing towards a slowdown in the economy
Chart 2: Tightening credit conditions have always negatively impacted the labour market
Continue to stay defensive, stick with bonds over equities
Chart 3: Bonds are increasingly more attractive compared to equities
Where to invest and what to avoid in equities?
Chart 4: Corporate balance sheets for Japanese companies are strong, even when compared to peers
Table 1: Recommended products for Japanese equities
|
Market / Sector |
Recommended Product |
|
Japan |
JPMorgan Funds - Japan Equity A (dist) SGD |
|
Eastspring Investments - Japan Dynamic AS SGD |
Chart 5: Asian ex-Japan equities are no longer cheap
Where to invest and what to avoid in fixed income?
Table 2: Recommended products for high-quality and short-duration bonds
|
Market / Sector |
Recommended Product |
|
Global bonds |
Allianz Global Opportunistic Bond Cl AMg Dis H2-SGD |
|
Short-duration bonds |
Nikko AM Shenton Short Term Bond SGD |
|
United SGD Fund Cl A Acc SGD |
|
|
LionGlobal Short Duration Bond A Dis SGD |
Chart 6: Despite the recent rebound, China’s property market is still significantly weaker than before
Asset allocation moving forward
Table 3: Recommended products for other equity segments we like
|
Market / Sector |
Recommended Product |
|
LATAM |
|
|
ASEAN |
Principal ASEAN Dynamic Fund Class SGD |
|
Value |
|
|
Commodity-linked |
Blackrock Natural Resources Growth & Income A2 USD |
The Research Team is part of iFAST Financial Pte Ltd.
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