Going into the second half of the year, the firm reduced exposure to US equities to neutral and turned slightly overweight on EM equities from a neutral position earlier this year. The biggest overweights are toward European and Japanese equities.
“We are not positioned for a correction in US equities or global equities” thanks to secular economic growth globally, he said at a recent media briefing in Hong Kong. He pointed out that global GDP growth is set to improve this year, the first time since 2014.
“The outperformance of and optimism for US equities have been supported by underlying economic growth as opposed to being propelled by the reflation trade,” he explained.
However, he said mixed data is now coming out of the US. “Consumer spending is flattening but business investment is still picking up.”
Investor expectations that the US government will push out new policies promised by president Donald Trump, such as the repeal of Obamacare and tax cuts, have decreased since January.
“Reflation [expectations] are likely to turn into a modest expansion and we will not see the stimulus that investors expected at the beginning of this year.”
In contrast, European and Japanese equities offer more value with less political uncertainties, Anderson noted. “The impact of Brexit would be more localised in the UK and the Eurozone, but less of a concern to the global markets.”
For EM equities, “the headwinds, such as a strong reflationary trend in the US, have dissipated”, he said.
An additional positive factor is that the Chinese economy is expected to have stable growth this year.
“The hard work for Chinese policymakers is for next year, when the financial risks need to be addressed. For this year, the main focus is the leadership transition.”
The firm has an overweight position on H-shares, or Hong Kong-listed Chinese companies. Sector preference includes the internet services, such as an online education and healthcare.
