Morgan Asset Management's Asia Pacific Chief Market Strategist, Hui Cheong-tai, stated that the US-Iran ceasefire agreement is fragile, expressing cautious optimism regarding the prospects of a satisfactory deal for both sides. He anticipates continued volatility in the Middle East situation in the coming weeks. He noted that inflation driven by oil prices is temporary, and there is no necessity for the Federal Reserve to raise interest rates, hence maintaining the forecast for one interest rate cut by the Fed before the end of the year. Hui pointed out that if a ceasefire is reached in the second quarter among the US, Iran, and other nations, oil prices are expected to return to a range of $80 to $90 per barrel. On the other hand, due to renewed expectations of higher tariffs, inflationary pressures are likely to persist, limiting the Fed's room for significant rate reductions. He projected that oil prices could potentially reach $120 to $150 per barrel in a worst-case scenario. From an investment perspective, Hui further indicated that the long-term view remains "equities over bonds," and the current market volatility presents new entry points for investors. He advised investors with ample cash to enter the market in phases, including US tech stocks and technology hardware companies in Taiwan, China, and South Korea. Although the valuation attractiveness of US tech stocks has increased, selectivity is crucial. He is also optimistic about the financial, industrial, and defense-related sectors, suggesting that robotics and autonomous driving will be the next focal points for market investment. Regarding the potential listing of large AI model companies in the US this year, Hui anticipates it could boost market sentiment, though the investor base for such companies remains relatively narrow. Additionally, Morgan Asset Management continues to favor mainland China and Hong Kong stock markets, viewing their prospects positively, supported by the AI theme in specific sectors. If the Middle East situation stabilizes and China's economy remains steady, the Hang Seng Index has room to rebound to 27,000 points. Investors with sufficient cash are advised to gradually increase their holdings in Hong Kong stocks. He also expressed long-term optimism towards Chinese tech stocks, particularly favoring newly listed large model and semiconductor companies from the past one to two years.
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