New year sees new market jitters

World
Europe

02:03

It was a roller-coaster ride in 2018 thanks to the China-U.S. trade war being a major surprise, a see-saw spat over Brexit deal and global central banks' tightening bias.

2019 will be packed with fresh market jitters over the same concerns. And China is in the middle of all those just-mentioned stories. So how should investors stay ahead of the curve?

Before the U.S. and China reach a final deal, safer assets will be high in demand.

“The domestic investors should continue to overweight on the bond market, as we still expect the PBOC and the Chinese monetary authority to introduce more monetary easing. So the oversea market will still like those defensive stocks with strong balance sheets,” said Jimmy Zhu, Fullerton Markets Chief Strategist.

The ECB has lowered its growth forecast while other European banks are staying put. The U.S. rate hike is likely to slow down, while China's monetary policy will be accommodated.

Dan Wang, an economist from the Economist Intelligence Unit / CGTN Photo

In terms of monetary cycle, Dan Wang, an economist from the Economist Intelligence Unit said that previously, "we expect[ed] the Fed to raise rates by three times. But now, we think it could at most, two. The trade war will really hit the U.S. harder than it hits China.”

And Hong Hao, chief strategist at BOCOM International, believed that the interest rate differentiation between China and the rest of world won't be as great as it has been in 2018.

“I think in 2019, if China continues to ease [monetary policy], and then the U.S. Fed and ECB start to follow ease or stop to raise interest rate. Then the interest rate differentiation between China and the rest of world won't be as great as it has been in 2018. So that should give Chinese yuan some support,” Hong explained.

Hong Hao, chief strategist at BOCOM International / CGTN Photo

As China wrapped up 40 years of reform and opening-up, analysts expect more packages of fiscal stimulus ahead to target smaller players in the private sector and lower investment barriers for international investors.

“In 2019, the risk is that the foreign politicians and economists fail to recognize the systematic importance of Chinese economy and also its impacts on global economy,” Hong warned.