Lim Yuin is our Chief Investment Strategist at Lion Global Investors with 17 years of financial industry experience specialising in asset management and securities. He was previously the Portfolio Manager of the LionGlobal Disruptive Innovation Fund and a Japan Equities Analyst at the firm before moving into his current role.
Dawn Leong: Consensus has generally been positive on the fixed income markets this year, particularly on the back of decent yields at elevated rates. The US Federal Reserve has paused rates in June, after 10 consecutive hikes, though dot plot suggests another 50bps for the rest of this year. What about fixed income markets? Is there a particular segment that we like?
Lim Yuin: Indeed, interest rates are high in developed markets and we are at the tail end of the interest rate hiking cycle. We are positive on short duration, higher quality bonds as yields are attractive and they offer the potential for capital appreciation should we enter a recession. We also see selective opportunities in certain Asian credits where spreads are still wide on concerns over yield volatility.
Dawn Leong: Japan has hit a 33-year high, fastest horse in the race this year. Investors have piled into the market and we have been seeing meaningful inflows. What are the key drivers of the market going forward, and do we have more legs behind this rally?
Lim Yuin: There are two key reasons why investors are positive on Japan equities. Firstly, companies have become more proactive in increasing their dividends and share buybacks to improve their capital efficiency as requested by the Tokyo Stock Exchange. Secondly, Japan is finally exiting from its deflationary phase and wages are rising at rates not seen since the 1990s.
We believe this will drive consumption and growth in the domestic economy. Valuations are not stretched on decent earnings expectation for next year. As such, we remain positive on Japan equities.
Dawn Leong: Late last year, markets were brimming with optimism when China reopened. But this year, it seems like things have taken a turn. Geopolitical tensions have been the overhang for a while now. The latest macro data seems to imply that growth momentum has stalled and markets are disappointed at the lack of major stimulus announced during the State Council meetings in June to rejuvenate the growth engine. How should investors be positioned now?
Lim Yuin: We believe that several catalysts are required for a rejuvenated rally in China equities: i) better economic data that suggests sustained growth momentum, ii) announcement of more economic support policies by the Chinese government, and iii) improving geopolitical relationship with the US.
For that, we could see improvements in 2 areas. Firstly, better relationship after the visit by US Secretary of State Blinken and a potential visit by US Treasury Secretary Yellen later this month. Secondly, new stimulus measures could also be announced during the Politburo meetings in July.
Dawn Leong: There has been reinvigorated interest in India. The China Plus One talks have been making their rounds – do you think that India could be a beneficiary and why?
Lim Yuin: We are long-term positive on India on structural reforms. India is currently undergoing a manufacturing renaissance and could potentially be an alternative factory of the world besides China.
The Modi government has also undertaken a series of positive reforms to cut red tape, streamline their tax codes and improve infrastructure to attract foreign direct investments. India’s middle class is also growing which would be positive for India’s domestic economy.
Dawn Leong: Thanks Lim Yuin. Always great to have you on the show.
*All data are sourced from Lion Global Investors and Bloomberg as at June 2023 unless otherwise stated.
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