Manulife Funding Administration Sees Engaging Alternatives Outdoors the US Amid Anticipated International Fee-Reducing Cycle

• A pivotal shift within the financial panorama is anticipated as a mirrored image of the aggressive tightening cycle of 2023.

• The Asian credit score market’s constructive momentum is predicted to proceed, providing engaging revenue and potential capital features.

• With easing headwinds and engaging valuations, there may very well be a possible re-rating in Asian equities with pockets of alternatives in China, India and South Korean Electrical Car (EV) sector.

HONG KONG and SINGAPORE, July 24, 2024 /PRNewswire/ — Reflecting on the aggressive tightening cycle of 2023, Manulife Funding Administration (Manulife IM) now anticipates a pivotal shift within the world financial panorama. At its 2024 Mid-Yr Funding Outlook Media Briefing as we speak, Manulife IM revealed that the US rate of interest has doubtless peaked and expects the US Federal Reserve (Fed) to hitch the worldwide easing cycle later this 12 months.

Inflation is predicted to align with the Fed’s targets, whereas employment shouldn’t be anticipated to exert upward strain on companies inflation. Regardless of these favorable developments, a basic slowdown within the US financial system is predicted, pushed by tightening circumstances for companies and shoppers. This nuanced outlook underscores the significance of strategic adaptability for traders within the evolving financial surroundings.

Luke Browne, Head of Asset Allocation, Asia, Manulife Funding Administration, mentioned: “We believe the global economy remains in decent shape as we stand here at the midpoint of the year. Leadership from an economic perspective remains with the US, driven by strong consumer activity, despite some recent cooling. Economies like Europe, Japan, and China have shown signs of stabilization and improvement, with policymakers intervening to support challenged sectors such as the property market in China.”

“The pace of disinflation globally, particularly in the US will be our focus for the remainder of the year. Central banks in developed countries like Switzerland, Canada, and recently the European Central Bank have cut rates over the past several months. However, the US Fed has been more cautious due to persistent inflationary factors like auto insurance and shelter costs, which have caused disinflation to progress unevenly.”

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“Looking ahead, we believe these one-off inflationary factors will stabilize, allowing the Fed to cut interest rates towards the end of the year. This is crucial as interest rate cuts in a stable growth environment could unlock relative value in markets. For instance, US small-cap stocks, which have been highly leveraged to the interest rate cycle and trade at multi-decade relative valuation discounts, are poised to benefit. Additionally, attractive opportunities emerge outside the US in both developed and emerging markets, particularly in Japan and India. In terms of sectors, energy and commodities should also be on investors’ radar as well. We observe emerging opportunities across ASEAN markets and as we progress through an easing cycle there will be opportunities to take advantage of.”

Asia Fastened Revenue: Optimistic momentum anticipated to proceed

Murray Collis, Senior Managing Director, Chief Funding Officer, Asia (ex-Japan) Fastened Revenue, Manulife Funding Administration highlights that the efficiency of Asian credit score has stood out 12 months to this point in contrast with different fastened revenue asset courses and there’s a sturdy case for the constructive momentum to proceed into year-end, delivering engaging revenue and potential capital features for traders.

Mr. Collis mentioned: “We have seen Asian credit navigate a relatively volatile fixed income market at the beginning of the year due to the uncertain Fed outlook, as well as elections across Asia that have not had a significant impact on Asian bonds so far with policy continuity largely expected by the market.  While US investment grade bonds have been negatively impacted by the Fed holding off on cutting rates, Asian investment grade credit outperformed on the back of resilient fundamentals and favorable market technicals. Asian high yield credit’s performance year to date was even more impressive, as stabilizing defaults and cheap valuations started to attract interest from investors.”

“From an Asian credit perspective, we expect the positive momentum in the asset class to continue into the second half, backed by robust investor demand to meet the expected pick-up in gross new issuance. Asia’s economic fundamentals remain resilient and continue to drive global growth. Relative to developed market credit, Asian credit continues to trade at attractive valuations and is poised to draw interest from investors potentially looking for diversification benefits and to increase allocations to risk-assets when the Fed potentially lower rates later in the year. Investment grade credit remain attractive on a risk-adjusted basis, and we also see opportunities in the Asian high yield space as credit spreads trade at historically wide levels, offering investors an attractive entry point into the asset class.”

Asian Equities: Engaging valuations and progress alternatives

Regardless of inflation being largely beneath management in Asia, persistent headwinds from larger US rates of interest have constrained consumption and funding in Asian economies. Nevertheless, Marco Giubin, Senior Portfolio Supervisor, Equities, Manulife Funding Administration believes that easing headwinds mixed with an upwards earnings revisions pattern for Asia ex Japan and engaging valuation might catalyze a possible re-rating in Asian equities.

Mr. Giubin mentioned: “Asian equities are currently trading at a projected price-to-earnings (P/E) ratio of approximately 12 times their estimated earnings for the year 2025, with an expected earnings growth rate of over 15%. In contrast, US equities are trading at a much higher projected P/E ratio of 21 times their estimated 2025 earnings, with a slightly lower expected earnings growth rate of 14%. Asian equities appear to offer more attractive value, providing investors with the potential for higher earnings growth at a lower price relative to US equities.”

From a geographic standpoint, Manulife IM is now extra constructive on China resulting from low valuations and extra cautious market expectations. “China’s incremental policy responses are expected to mitigate the impact of weakness from the property sector. While India remains a strong structural story, our positioning is cautious given elevated valuations and the Modi government’s slender majority, which raises questions about some drivers of its investment-led growth model. Consequently, we are starting to favor more consumption-related stocks that had underperformed industrial names before the Indian election.”

“In North Asia, we have become incrementally more positive on Korea relative to Taiwan region, given valuations and the upcycle in Dynamic Random Access Memory (DRAM), while many of Taiwan region’s tech stocks have re-rated significantly on the AI thematic despite many being only indirectly exposed. Additionally, many South Korean battery manufacturers have significantly underperformed due to concerns about EV market growth. We believe these names look extremely cheap given the growth opportunity that still exists. Recent protectionism against Chinese suppliers in markets like North America and Europe is likely to accelerate interest in South Korean EV supply chains as a substitute.” Mr. Giubin concluded.

About Manulife Funding Administration
Manulife Funding Administration is the model for the worldwide wealth and asset administration section of Manulife Monetary Company. Our mission is to make choices simpler and lives higher by empowering traders for a greater tomorrow. Serving greater than 17 million people, establishments, and retirement plan members, we consider our world attain, complementary companies, and the energy of our mum or dad firm place us to assist traders capitalize on as we speak’s rising world developments. We offer our purchasers entry to private and non-private funding options throughout equities, fastened revenue, multi-asset, different, and sustainability-linked methods, corresponding to pure capital, to assist them make extra knowledgeable monetary choices and obtain their funding goals. Not all choices can be found in all jurisdictions. For added info, please go to manulifeim.com.

Manulife Funding Administration is the worldwide wealth and asset administration section of Manulife Monetary Company. The data and/or evaluation contained on this materials have been compiled or arrived at from sources believed to be dependable however Manulife Funding Administration doesn’t make any illustration as to their accuracy, correctness, usefulness or completeness and doesn’t settle for legal responsibility for any loss arising from the use hereof or the knowledge and/or evaluation contained herein. Neither Manulife Funding Administration or its associates, nor any of their administrators, officers or staff shall assume any legal responsibility or duty for any direct or oblique loss or harm or some other consequence of any individual performing or not performing in reliance on the knowledge contained herein.

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Indonesia: PT Manulife Aset Manajemen Indonesia. Malaysia: Manulife Funding Administration (M) Berhad Registration No: 200801033087 (834424-U). Singapore: Manulife Funding Administration (Singapore) Pte. Ltd. (Firm Registration Quantity: 200709952G). Vietnam: Manulife Funding Fund Administration (Vietnam) Firm Restricted. Australia, South Korea and Hong Kong SAR: Manulife Funding Administration (Hong Kong) Restricted in Hong Kong and has not been reviewed by the HK Securities and Futures Fee (SFC). Philippines: Manulife Funding Administration and Belief Company. Japan: Manulife Funding Administration (Japan) Restricted. Taiwan area: Manulife Funding Administration (Taiwan) Co., Ltd. (Funding shouldn’t be protected by deposit insurance coverage, insurance coverage warranty fund or different safety mechanism in Taiwan. For the disputes resulted from the funding, it’s possible you’ll file a criticism to the Securities Funding Belief & Consulting Affiliation of Taiwan. or Monetary Ombudsman Establishment. License No. 110 Jin-Guan-Cheng-Tou-Xin-001 “Independently operated by Manulife Investment Management (Taiwan) Co., Ltd.” /3F., No.97, Songren Rd., Taipei, Taiwan 11073, Tel: (02)2757-5999, Buyer Service: 0800-070-998.)

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