The world economy is in a late expansion cycle with a projected growth rate of more than 3.5 percent this year, although global economies have diverged from a synchronized advance seen last year, HSBC Global Asset Management Taiwan Ltd (匯豐中華投信) said on Wednesday.
The US has seen balanced growth, while Europe and Japan lag behind the global pace of recovery, the company said, adding that China has held up well, despite its ongoing deleveraging efforts and being a target of US trade protectionism.
“This year has proven tough, as financial markets weakened in the first half,” chief investment officer Chang Ching-i (張靜宜) told a news conference.
Chang dismissed worries of a recession, despite rising trade war fears, saying that corporate fundamentals are still looking good, with global profit growth running at more than 7 percent.
Meanwhile, global default rates have continued to decline — from 5 percent at the end of 2016 to 3 percent this year, she said.
The backdrop warrants a prudent investment strategy and provides opportunity for bargain hunting, she added.
For the second half of this year, HSBC is positive on global equities, especially emerging markets, Europe and Japan, Chang said, adding that it favors emerging-market debt.
Asked if two more interest rate hikes by the US Federal Reserve this year would be downside risks for equity investors, Chang said that is not necessarily true, because what really matters is corporate profitability, adding that interest rate hikes have historically never derailed an upturn in equity markets.
Rather, US-China trade tensions would continue to be an overhang, even though China has increasingly shifted to a domestic demand-driven economy, HSBC said.
Asian economies that are highly exposed to the global value chain involving China and the US could be vulnerable if they depend heavily on external demand for growth or on external financing, fund manager Weber Lien (連伯瑋) said.
The extra tariffs imposed on Chinese goods account for a tiny share of China’s exports and US threats of more drastic measures sound more like political gestures to extract trade concessions from China, he said.
Asian equities are competitive and cheap, trading at a more than 40 percent discount versus US plays, Lien said, adding that healthy growth in corporate profits have been seen across sectors and markets in the region.
A sharp increase in oil prices could lead to a repricing of inflationary expectations in some emerging markets, the company said.
NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt. China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill. The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February,
The output of the global smartphone industry this year is to contract by 7.8 percent on an annual basis as the COVID-19 pandemic ushers in a global recession, Taipei-based market researcher TrendForce Corp (集邦科技) said in a report on Monday. The global production of smartphones is expected to fall to 1.29 billion units, as the pandemic dampens demand for consumer electronics, leading to a decline in shipments across Europe and North America, TrendForce said. With consumers delaying smartphone purchases and thereby lengthening the device replacement cycle, overall prices would suffer a setback that is expected to negatively affect the profitability of smartphone
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