The central feature of the Strategy is that trends that caused equity markets to stall in the first half of 2018 - weakening corporate earnings growth, gradually rising inflation and tightening global financial conditions - are set to intensify in the second half, creating an increasingly uncertain and volatile investment environment. Nevertheless, equity markets are likely to experience a relief rally in the third quarter amid rising interest rates. CCBIS advises investors to take advantage of this rally to reduce equity risk during the quarter and beyond.
As forecasted by CCBIS, by the end of this year, the HSI and HSCEI in Hong Kong will drop to 28,000 and 11,900 after peaking in the third quarter, representing a year-end price/earnings ratio of 10.5 and 7.9, respectively. At some stage, investors will begin to expect that the odds of below-trend growth in 2019 outweigh that of above-trend growth. When this shift occurs, equity markets will start to de-rate.
Taking all of the above into consideration, CCBIS "Overweight" the consumer discretionary, energy and information technology sectors, while consumer staples, financials, healthcare, materials and real estate sectors are rated "Neutral". The Telecom, utilities and industrials sectors are "Underweight". To lower risk, CCBIS prefers gold investment and takes construction and gas utilities as a defensive choice.
Taking into account market trends, CCBIS sector ratings are as follows:CCBIS rating / SectorOverweight / Consumer discretionary, energy, information technologyNeutral / Consumer staples, financials, healthcare, materials real estateUnderweight / Telecom, utilities, industrials
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