Global investors navigate high interest rates amid inflation control efforts
Amid recession concerns, inflation, and high interest rates, investors seek promising investment avenues. Stock enthusiasts believe global interest rates are close to peaking, while central banks watch inflation. The US Federal Reserve raised the federal funds rate to 5.25-5.50% in July, the highest in decades.
The European Central Bank increased rates by 0.25%, and the Bank of Japan hints at a shift from cheap money, adopting a flexible approach to yield control on government bonds.
Amonthep Chawla of CIMB Thai suggests most investors trust the Fed won’t hike interest rates further due to slowing inflation.
The ECB in July raised its policy rate to 4.25%, and the majority of investors believe that the bank will maintain this rate for a while to assess economic risks, according to Amonthep.
Criticism surrounds Japan’s YCC strategy of controlling yield curves, distorting markets by keeping long-term interest rates low, says Amonthep. Amonthep suggests phasing out the YCC strategy as the next step.
Asian central banks, according to him, are near the end of their fight against inflation, initiated last year.
Nattakrit Laotaweesap of Tisco Bank advises clients and investors to divest US investment assets, including real estate trusts and US stocks in the S&P500 index.
Morningstar Research (Thailand) recommends focusing on long-duration bonds for healthy long-term yields in fixed-income assets this year.
Kampon Adireksombat, SCB CIO, warns against high-yield bonds tied to Chinese real estate due to debt and slow recovery.
SCB CIO forecasts Japanese stock market short-term volatility due to rising government bond yields. They anticipate a rebound, with government bonds and yen stabilizing.
According to SCB CIO, banking stocks benefit most from rising bond yields as new and refinanced loan yields increase.
