Key Highlights fromFranklin Templeton’s APAC Investor Forum 2023
Expertsdiscussopportunitiesand risksfor investorsnavigating
a complex investment landscape
Hong Kong, November 2, 2023- Franklin Templeton host edits flagship APAC Investor Forum 2023,a hybrid event in Hong Kong that brings together a panel of investment experts, including our CIOs and Portfolio Managers from our collection of Specialist Investment Management teams, to discuss the evolving investment landscape marked by geopolitical shifts, technological innovation and changing demographics, and their investment perspectives for the new environment.
Commenting on recession risk and opportunities in 2024, Stephen Dover, Chief Market Strategist and Head of the Franklin Templeton Institute said:
“While the likelihood of a least a mild of recession in the U.S. remains high, emerging markets, in particular Asia, may be more resilient. A weakening US dollar should support emerging markets, particularly those that will benefit from shifting supply chain dynamics. Lower debt levels, inflation, interest rates, and solid fiscal policy puts many Asian countries in a more favorable position. We see the greatest opportunities in Japan which is seeing a reversal of multi decade trends that are now showing positive momentum. We also see opportunities in Southern Asia. From an asset class perspective, fixed income globally is attractive as interest rates are at 10-year highs and are likely near peak levels in most regions. In terms of equities, we do not think U.S. earnings expectations are priced for an earnings slowdown. We prefer equity markets outside of the US.”
Commenting on inflation and rates outlook, Dr. Sonal Desai, Chief Investment Officer, Franklin Templeton Fixed Income, said:
“I think we are getting closer to peak rates and the markets are starting to internalize what the Federal Reserve intends to do over the coming quarters; however, they are still overestimating the likelihood of rate cuts next year. We believe it is very possible that the Federal Reserve does not start easing at least until the end of 2024. There are a few factors behind this:1) Supply issues (expected massive US fiscal deficits over the next several years); 2) Demand issues (Japan and China–two major holders of US treasuries–are likely to show less interest in US debt going forward); 3)Fundamental factors (inflation is likely stickier than markets expect as getting back to 2% inflation is challenging). All of this, combined with the market pricing in the return of a healthier level of term premia and a real rate closer to pre-global financial crisisaverages is pushing long-term rates higher. This process, supported by the short-end rates rallying, has helped steepen the US yield curve which is what we have been
positioned for.