Standard Chartered’s Will Leung on His Strategies for This ‘Critical Week’


Will Leung is an award recipient for “Analyst of the Year” from BENCHMARK in 2013.

By Emily Lai

“A great victory” described by Greece’s Prime Minister Alexis Tsipras leaves a huge question mark on the market. 61% of the Greek people voted against further austerity for bailout plans on the country, leaving European leaders to decide if Greece can still stay in the Eurozone. Will Leung, Head of Investment Strategy, Hong Kong and China at Standard Chartered Bank (Hong Kong) regards the result as generating risk-off sentiments in the market, but not really creating a panic. “For now, we don’t know about the next step,” he says. “But looking at the euro you see people are not really panicking about it.”

He regards this week as “a critical week”. “The vote is just one step in reinforcing their negotiation power with the endorsement of the people,” he says. “The real challenge lies in the negotiation ahead. The market will then focus on whether Greece can repay the EUR 3.2bn loan to the European Central Bank on 20 July. He thinks a default to the ECB would be more detrimental than a non-payment to the IMF, because the ECB may have to cut off the assistance immediately.

As for the US, another cause for movement in the market will be the speculation on when the Federal Reserve will raise rates. Leung tells BENCHMARK he is adjusting his views from “earliest in September” to “a higher probability to delay to December” because of the zero growth in average hourly earnings, this adjustment would be particularly significant in many of his investment strategies. BM

Will Leung shares with BENCHMARK his strategy for this critical week:-

  • Despite the Chinese government’s effort in pushing out policies, the stock market still slumped last week. Leung believes the market will be more stable this week but still needs time for the confidence to build up again, so strategies for A shares have to be more long term. Further rate cuts would not have much effect on the equity markets anymore; instead, company earnings and valuations might take over as the fuel.
  • H-shares now fare better in the selloff as they lagged in the run-up in the first place, but Leung recommends waiting until company earnings and the Greek incident becomes clearer
  • Commodity currency may have a short term rebound, especially with the New Zealand Dollar routing 9% in Q2 and the Aussie reaching a six-year-low. However, uncertainties lie in the central banks’ actions as they still perceive their currency as overvalued
  • The British pound is a good investment for medium to long term, as it will probably be the second major economy that will raise rates in the near future. The economic data is satisfactory and capital will continue to flow in given the liquidity injection by the ECB
  • The Reserve Bank of Australia and the Bank of England will be holding policy meetings on Tuesday and Thursday respectively
Haven Assets
  • Risk factors including the Greek incident and the Fed rate hike will be positive for bonds and gold; however, the strong dollar can be affecting them negativel
  • Corporate bonds are preferred over sovereign bonds as they can ride on the rate hike and company performance at the same time
  • Both on-shore and off-shore RMB bonds will be safe investments for the rest of the year; yields are stable and RMB is steady
  • Gold will benefit if the market delays the expected time of Fed rate hike, but the upside is limited
  • May not be able to continue its rally in Q3 as economic growth is not strong
  • Oversupply is still an issue