VP Bank positive on emerging bonds – WealthBriefingAsia

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VP Bank positive on emerging bonds – WealthBriefingAsia

VP Bank positive on emerging bonds

VP Bank, a private bank based in Liechtenstein, believes that there is a lot of positive news coming from the economy and financial markets, with a rise in the Japanese Nikkei index and an improvement in the business climate among companies . Despite this good news, VP Bank believes it is important to remain cautious – to get out and invest, but not to throw caution overboard.

With economic indicators improving, VP Bank believes that short-duration US high-yield bonds and emerging market bonds offer yield advantage, and Chinese stocks are poised to make a comeback.

VP Bank stressed that an improvement in the global economic environment appears to be in sight, but the situation remains difficult. The American Federal Reserve, which aims to reduce interest rates, communicates this. However, if the U.S. economy continues to grow, the need for interest rate cuts could be called into question, the bank said in a note. Better-than-expected labor market numbers for March show the U.S. economy continues to do well.

Recently, small and medium-sized businesses have lowered their employment expectations. Overall, this points to weaker labor market numbers in the coming months and, consequently, lower interest rates from the Fed. However, if these indicators turn out to be nothing more than a smokescreen, VP Bank believes the Fed may be forced to rethink its policy.


Emerging Markets Bonds
“Emerging market bond yields remained stable – despite a slight rise in market interest rates measured at the long end of the US yield curve. Conversely, risk premiums on emerging market bonds have fallen. This shows the high level of confidence that emerging market debt instruments currently enjoy,” Dr Felix Brill, chief investment officer at VP Bank, said this week. “In any case, VP Bank believes that its positive assessment of this market segment has been confirmed and therefore maintains its overweighting.”

The economic situation in China, which remains generally tense, also appears to be improving slightly, which VP Bank also sees as a positive development.


Japanese stocks
For a long time, Japan has not been a favorite of investors. Persistent deflation, stagnant stock markets and an often opaque corporate culture have led investors to prefer to invest in other regions. But that has changed, VP Bank said. Japanese financial markets are undergoing structural change.

After years of deflation, the country is on its way to a new normal and long-awaited corporate governance reforms are now being implemented. Increasing share buybacks, a more attractive dividend policy, a greater focus on shareholder value and activist investors demanding higher returns on capital are making Japanese stocks attractive again to investors, the company added. bank. As a result, Japan’s most followed stock index, the Nikkei 225, hit a record high. Previous highs date back to 1989. VP Bank said it holds a neutral position on Japanese stocks.

Other wealth managers such as Swiss private bank Julius Baer and BNY Mellon Wealth Management are also favoring Japanese stocks in 2024. Find out more here.


Gold
Demand for physical gold remains high, particularly in Asia, while speculative investors increasingly jump on the bandwagon. But as the price of gold soared to record highs, Brill said the recent rally was viewed critically and many investors were holding back. In March, listed gold funds recorded capital outflows for the tenth consecutive time.

“Recently launched Bitcoin funds could also reduce demand, as some investors compare the cryptocurrency to gold, in addition to bonds with attractive interest rates. Even if the environment remains attractive, the air has become thinner in the short term. If the economy remains robust and speculative positions are liquidated, this could lead to setbacks,” continued Brill. VP Bank has therefore decided to take its profits and is underweight on gold.

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