Play It Safe This Year, StanChart Warns Investors

Standard Chartered is recommending a “Play it Safe” investment strategy for its investors in Kenya.  This is in response to expected recessions in the US and Europe, a recovery in China, a slowdown in global inflation, and a pause in Fed rates in H1 23, followed by cuts in H2 23.

This advice was shared by Manpreet Gill, Chief Investment Officer, Africa Middle East Europe(AMEE) during a media and analysts briefing in Nairobi.

“While financial markets experienced strain in 2022, with stocks and bonds down, we believe that 2023 holds promise for investors as markets respond to performance adjustments. We see opportunities in consumer-focused equity sectors in China as economic activity gradually normalizes. In Foreign Exchange, Standard Chartered is bullish on the EURO and Japanese Yen on a 12-month horizon,” Manpreet commented.

He encouraged local investors to leverage the bank’s “combination of deep understanding of local markets on the ground with its global reach to access wealth and investment solutions from the world’s leading financial centers.”

“Our research reveals that clients are keen to increase their regular cashflows to cater to life goals such as children’s education, retirement, and improved lifestyle. The current environment offers a rare opportunity to secure higher yields by investing in high-quality bonds and diversifying in currencies,” Paul Njoki, Head of Affluent Banking and Wealth Kenya & East Africa said.

While StanChart expects central banks to continue tightening policy in the first half of 2023, potentially surprising investors with the size of rate hikes, analysts believe they will reverse course in the second half of the year as it becomes clear that economies are heading into a recession.

Backed by China’s easing mobility restrictions, expansionary economic policy settings, and targeted measures to support the property sector, analysts at the bank believe that Asian assets are set to outperform.

“Asia USD bonds have already outperformed other major bond markets markedly in 2022, but the rise in risk-free USD yields meant they still delivered double-digit negative returns. We expect continued outperformance in 2023, but with significantly positive returns. We also expect the risk-reward balance to be more favorable for the more attractively valued Asia-ex-Japan equities than for global equities,” said the lender in a statement.

“We anticipate that a recession is likely in the US and Europe in the first half of the year. Once the Fed pivots from focusing on bringing down inflation to supporting growth, likely in the second half of 2023, equity markets are likely to become increasingly attractive.”

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