The Singapore-based bank sets out its asset allocation thinking as investors head into the second quarter of 2022. It likes Chinese stocks, is not keen on European equities and remains positive about the US market. Meanwhile, it likes gold.

DBS is increasing its weighting to Chinese equities to “overweight” because of their valuations and the supportive monetary policy of the country’s central bank, while it has turned more cautious about Europe as the region – a net energy importer – is hit by surging prices. The Singapore-based bank said it remains overweight on US stocks. 

The bank is also underweight Japanese equities, but overweight Asia ex-Japan stocks, DBS said in its its second-quarter chief investment office report, issued yesterday.

DBS said the US dollar is underpinned by a series of US Federal Reserve rate hikes, a situation contrasting with the continued ultra-loose monetary policy of the European Central Bank. With worries about Russia’s invasion of Ukraine and other factors rattling nerves, investors are pushing into “safer” assets – which tends to boost the US dollar, DBS said.

“While rising energy prices will be a major headwind driving stagflation fears, this could be partly offset by the Fed adopting a more cautious stance on rate hikes. Investors should re-focus their attention to fundamentals as the post-pandemic recovery continues,” the bank’s report said.

On the fixed income side, DBS said it is concentrating on holding developed market investment-grade debt because of rising volatility, preferring to hold five-year maturities as the “sweet spot” of the market.

Among the alternative assets area, DBS likes growth capital in private equity as a way of tapping into forms with expansion potential, while it also likes gold. It is underweight cash for the next three months, moving to a neutral position over 12 months.