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APB Intensive 8.0 – Fund selectors favour fixed income in 2024

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Fixed income will perform well in 2024 after several years of challenged returns, particularly three-to-five year investment grade credit. Meanwhile, Japan and India equities offer meaningful alternatives to China.

This is according to fund selectors attending Asian Private Banker‘s eighth Intensive event, which gathered professionals from Asia’s fund selector community across more than 20 institutions.

At the exclusive virtual event, three hand-picked fund houses were given the opportunity through eight-minute pitches to present their strategies to fund selectors. Following a turbulent 2023, asset managers gave insights from rate hikes to China’s property slump to geopolitics, as well as product solutions covering sustainability, mega-trends, and short-duration credit.

The presentations were bookended by commentary from UBP and Bank of Singapore, whose insights are presented below.

Fixed income remains in favour

Assuming the US is not going into a recession, continued disinflation, and gentle rate cuts in 2H24, Paras Gupta, head of investment services Southeast Asia and head of DPM Asia, UBP, prefers fixed income in 2024 after three years of difficult returns.

Paras Gupta, UBP

“It’s not to say that we are averse to equities – we have a moderately positive stance on equities – just that there are other alternatives that are now available,” said Gupta.

Gupta’s focus is on three to five-year maturity investment grade credit, which he believes has the most attractive risk-adjusted returns of high single digits in 2024.

Kelvin Tang, head of chief investment office, Hong Kong branch, Bank of Singapore, also believes fixed income will perform well given the likelihood of lower rates this year. Targeting improving macro and market uncertainty, especially with 40 elections worldwide in 2024, he also overweights Japanese stocks along with gold and alternatives.

China continues to be challenging

With a neutral stance on Hong Kong and mainland Chinese stocks due to low valuations and light positioning in this space, Tang thinks more policy support in the world’s second-biggest economy can support a short-term rebound.

Kelvin Tang, Bank of Singapore

Against this backdrop, Tang believes investors would do well to focus on the proliferation of generative AI, market leaders with high quality growth, and domestic companies with rising overseas exposure, which can reduce reliance on local market.

“High dividend stocks should offer very good diversification benefits to investors, especially with the defensive nature of these stocks,” said Tang.

However, Gupta believes it is still too early to become meaningfully invested in China as it navigates through its post-bubble credit restructuring phase – advising against aggressive positioning – and instead urges clients to focus on areas aligning closely with policy objectives.

Regional exposure 

Taking a regional perspective, Gupta has been eyeing India, where equity performance has kept apace with GDP growth while remaining attractive over the long term.

Despite expecting pullbacks in the future as India has been a strong market over the past years, Gupta sees these as opportunities to build exposure.

“With the problems that China has faced, clients and investors have looked at other markets in a more meaningful fashion,” said Gupta.

Tang remains neutral on the US, Europe, and Asia, emphasising his preference for Japanese stocks on the back of improving macro fundamentals, ongoing corporate reforms, as well as rising productivity. This is despite uncertainty surrounding the Bank of Japan’s monetary policy potentially triggering market volatility.

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