Trading Asian equities in a Fed hiking cycle
EWJ•Asian equities rose around 15% on average during the last three Fed hiking cycles, but fell around 8% in the six months before the first hike, HSBC said. HSBC raised Taiwan to overweight and downgraded Hong Kong and Singapore to neutral.
1. Asian equities and rate hikes
Asian equities rose around 15% on average during the last three Fed hiking cycles, HSBC said, while they fell around 8% on average in the six months before the first hike. HSBC strategist Herald van der Linde said markets remain vulnerable to abrupt repricing while investors are still gauging the Fed’s path and terminal rate.
2. HSBC shifts regional views
HSBC raised Taiwan to overweight, citing defensive characteristics, growth prospects and corporate fundamentals. It cut Hong Kong to neutral, citing sensitivity to higher bond yields and tighter cross-border investment policies, and downgraded Singapore to neutral because valuations looked demanding.
3. Valuations and performance
The FTSE Asia Pacific ex Japan index was up around 20% year to date. HSBC said APAC price-to-earnings multiples fell from 14.2 times at the start of the year to 10.1 times.
