HONG KONG SAR - Media OutReach - 8 June 2023 - Today, KGI Asia has released its 2023 Mid-Year Global Market Outlook, which covers mainland China, Hong Kong, Taiwan, the U.S., Singapore, and Indonesia. In the 1H23, Global markets were traded at a range-bound. At the end of the first quarter, the market was first dragged by the banking crisis but managed to rebound as the market expected the end of a rate hike coupled with a better-than-expected economic outlook. However, the stock market remains highly volatile and undirectional, due to the disappointing China economic data. Is it possible for the U.S. to have a soft landing? Is the high-interest rate going to trigger other crises? Are the policies implemented by the PRC government bringing any investment opportunities? Under this backdrop, we would recommend the "LIKE" strategy for the rest of 2023:L - Large-cap growth stocks offer better defensive quality I - Capitalize on higher yields of Investment grade bondsKE - Diversify across Key Eastern Countries Kevin Tai, Head of International Wealth Management at KGI Asia, says: "The U.S. rate hike cycle may soon come to an end, economic performance is expected to be the next market focus. Based on the fact that market uncertainty remains, we would recommend keeping your portfolio diversified with allocation on both stocks and bonds. In terms of stocks, we suggest large-cap stocks that can potentially provide higher value to investors. For Fixed Income Investment, we prioritize investment-grade bonds. Here, KGI Asia proposes a strategy called "LIKE". " Global Macro and the U.S. The U.S. is in the late stage of economic expansion, evident in a low unemployment rate and high inflation. Despite tight monetary policy, we expect the country to avoid a recession in 2H23, due to a strong private sector balance sheet. With minimal reliance on residential investments and debt ratios for households and enterprises at the lowest levels in decades, the U.S. economy has been resilient to a high-interest rate in terms of consumption and investments, especially as 96% of nationwide mortgages are subject to fixed-interest rates. The U.S. stock performance has been better than expected in 1H23, boosted by the country's economic resilience and stock rerating within the tech sector, driven by the launch of generative AI. We expect the U.S. stock market to be shored up by near-term positives, including the easing of the bank liquidity crisis, the tech sector rerating, and improving corporate earnings. Easing recession concerns and the AI frenzy have helped maintain stock rallies year-to-date, but that doesn't mean that macroeconomic risks have abated. The recession may have been postponed, likely to 1H24, rather than avoided entirely. The U.S. economic resilience means the Fed will have no choice but to keep interest rates high, and tightening policy will eventually lead to deterioration of the labor market, which would hurt consumption and investment. High valuations, a tight monetary environment, and potential economic recession are detrimental to the stock market over the long run. Historically, new structural trends strong enough to propel large tech firms, such as the launch of generative AI, may have led to near-term buying frenzies within stock markets, but they have rarely altered the course of economic cycles or made markets immune to economic downcycles. As such, investors should stay alert to short-term risks facing large tech firms following recent gains. We believe it would be prudent to gradually switch to defensive stocks during the market rally. In terms of bond investments, we expect the Fed to pause rate hikes in June or July as inflation has declined from the peak and banks are already tightening lending standards. That said, we expect inflation to remain far above the Fed's target at the end of this year, and therefore maintain the rate at a high rate. Against such a backdrop, we suggest that investors consider accumulating Treasury bonds in the period between the pause of rate hikes and the start of rate cuts. Additionally, investors should expand their positions in medium- and long-term Treasury notes and investment-grade corporate bonds with higher ratings whenever the Fed issues tightening guidance. Finally, we advise investors to steer clear of high-yield and emerging-market bonds. James Chu, Chairman at KGI Investment Advisory, says: "With subsiding recession fears, the U.S. stock market has managed to beat expectations so far this year. Near-term catalysts include an apparent end to the bank liquidity crisis, a tech re-rating on the back of generative AI, and improving corporate earnings. However, we caution that macroeconomic risks still linger and expect that a recession, though later than originally...