In an interview with Bloomberg TV, Ken Wong of Eastspring Investments said that because the Fed’s interest rate hikes aren’t necessarily factoring in the continuing war in Ukraine, China’s ongoing strict Covid policies and the high minimum wage in the U.S., the central bank could choose instead to ease up on monetary policies or introduce QE if more extreme measures are necessary.
When asked about opportunities in Asia, Wong told Bloomberg that value investing in Japan as “a lot of merit” particularly because the yen is weaker and the country has just reopened its borders to more tourists. There are also pockets in China, Wong said, due to how growth and new economy stocks have been impacted over the past several months. Wong also believes there will be “more clarity” following the National Congress in October, in regards to whether the government will take a more pro-growth versus a more pro-reforms approach. Currently, investors are underweighting Chinese stocks, most likely biding their time until the Congress to see what route China will take over the next 5 years.
The weak yuan is actually a benefit to exports, especially because of the disparity between the China 10-year bond and the U.S. 10-year Treasury bond, and could attract some foreign direct investments (FDIs) back into China after the October Congress, which could set the country on a positive track into 2023, Wong told Bloomberg.