Asia-Pacific banking, multi-asset outlook, and FX markets analysis

Genuine Impact
May 9 · 3 min read
Alister Sneddon, CTO

Here are the top 3 insights for May 9th, prepared by Alister, our CTO.

Today’s Brief

  • S&P Global: Asia-Pacific Banking: Despite Different Strokes, Government Lifeline Is Still Likely
  • Wellington Management: Multi-Asset Outlook — What’s really changed?
  • Neuberger Berman: FX Markets — What’s Top-Down and What’s Bottom-Up?

Asia-Pacific Banking: Despite Different Strokes, Government Lifeline Is Still Likely

  • Many Asia-Pacific countries retain the flexibility of government bailouts as a support mechanism.
  • We see extraordinary government support as the most likely form of support in a crisis for the majority of Asia-Pacific banking systems.
  • In contrast, extraordinary support for systematically important banks is uncertain in most Western Europe and North American jurisdictions where banks are more likely to rely on ALAC.
  • Resolution reforms, including for the possibility of bail-in and not bailout, have recently made significant progress in Japan, Singapore, Hong Kong, and Australia.

Genuine Scores for the top 3 Asia Pacific focused funds

  • LO Funds — Asia Value Bond, 77
  • Fidelity Funds — Asian Hi Yield, 71
  • First State Asian Quality Bond, 65

Multi-Asset Outlook — What’s really changed?

  • Favor credit over equities, and within credit, investment-grade and high-yield bonds over bank loans.
  • Within equities, lean into defensive factors, such as quality and safety, and consider emerging markets, which could outperform if China reaccelerates.
  • Our differentiated views, credit over equities, and EM equities as a hedge
  • Risks: Fed policy changes, expanded trade war, upside economic surprise

Genuine Scores for top 3 Mixed Asset funds

  • Columbia Thermostat Fund, 94
  • T Rowe Price Capital Appreciation Fund, 94
  • John Hancock Capital Appreciation Value Fund, 94

FX Markets: What’s Top-Down and What’s Bottom-Up?

  • In most strategic and tactical asset allocation processes, foreign-exchange exposures — especially emerging markets foreign exchange exposures — are implicit and go unconsidered by investors.
  • At Neuberger Berman foreign exchange has always been considered an explicit alpha source that plays an important role in an effective asset allocation process.
  • Nonetheless, because we assess each currency using bottom-up country-by-country indicators, we have long recognized that our allocation process may be missing the top-down factors behind the performance of individual currencies.
  • Moreover, the higher correlations among emerging markets currencies since the financial crisis of 2008–09 indicate the growing importance of these top-down factors.
  • In this paper we propose an intuitive top-down, five-factor model of foreign exchange returns.
  • We show that this model can be used to separate systematic from genuinely idiosyncratic return drivers in foreign exchange markets, and also to build a simple, systematic long-short strategy that would have substantially outperformed the average EM or DM currency market return over the past 10–15 years.

Genuine Scores for the top 3 Globally focused Bond funds

  • PIMCO Short Asset Investment Fund, 100
  • Pioneer Multi-Asset Ultrashort Income Fund, 99
  • DFA Two-Year Global Fixed Income Portfolio, 99

Want to get the the Genuine Impact app? You can download the Genuine Impact app for iOS and Android devices on our website, https://www.genuineimpact.co.uk

All the best, Alister and the Genuine Impact Team

p.s. all Genuine Scores are accurate as of the 5th of April

Genuine Impact

Written by

An investment intelligence platform created for everyone https://www.genuineimpact.co.uk/