Vietnam's 2025 Strategy: High-interest bonds steer steady, leading the copper-uranium “gap market”

The Zhitong Finance App learned that Morgan Stanley's latest 2025 Global Strategy Research Report conducted in-depth analysis and predictions on key areas such as global economic growth, policy trends, asset allocation, and commodity markets, and presented investors with a detailed market guide.

Macroeconomics: Growth Divergence and Dollar Weakness Cycle

There has been a shift in the policy of the Federal Reserve. It is expected that interest rates will be cut only once by 25 basis points in 2025 (which may be implemented in June). This expectation allows the market to make a more clear judgment on the direction of US interest rates. Affected by this, the year-end target for 10-year US Treasury yields was lowered to 4.0%, while the current yield is 4.3%. The decline in real interest rates is the main driving force behind this change. This means that in the current economic environment, the market's pricing of capital is undergoing subtle changes, and investors need to pay close attention to actual interest rate trends in order to seize investment opportunities in the bond market.

Meanwhile, global interest rates are showing a trend of convergence. The ECB maintains a loose monetary policy, and the German 10-year treasury bond yield target is 1.80%. Compared with the current yield level of 2.84%, it shows the unique appeal of the European bond market in a downward interest rate cycle. Meanwhile, the Bank of Japan postponed interest rate hikes until September, and the yield on 10-year Japanese bonds was anchored at 1.2%. This series of actions shows that the coordination and balance of interest rate policies among the world's major economies is gradually being formed.

The trend of the US Dollar Index (DXY) has also entered a new phase. Although the Federal Reserve's interest rate cuts are limited, the “American exceptionalism” expected by the market is gradually shifting towards “global convergence.” This change provides an opportunity for phased safe-haven assets for non-US currencies such as the yen and the pound. The target exchange rate for the yen is 141 and the target exchange rate for the pound against the US dollar is 1.3. The setting of these exchange rate targets reflects the market's new expectations for global capital flows and exchange rate balance.

G4 central bank policy path: easing cycle extended

Currently, the monetary policy path of the world's major central banks is showing a clear trend of differentiation and adjustment. The extension of the easing cycle has become the main theme, but the policy trends of different economies have their own characteristics, which have had a profound impact on financial markets and the global economic landscape.

On the US side, the current policy interest rate is 4.375%, and it is expected to drop to 4.125% by the end of 2025. The critical point is June, when interest rates are expected to be cut by 25 basis points. This interest rate cut is expected to reflect the weakening momentum of US economic growth and the easing of inflationary pressure. By moderately lowering interest rates, the Federal Reserve aims to balance the relationship between economic growth and inflation control to support the sustainable recovery of the economy.

The current policy interest rate in the Eurozone is 2.50%, and it is expected to be lowered to 2.25% at the end of 2025. The critical point may be the April meeting, at which time the ECB may release a signal of easing. Eurozone economic growth faces many challenges, including the impact of geopolitical tension on trade and weak internal market demand. By maintaining low interest rates, the ECB hopes to stimulate investment and consumption and drive the economic recovery process.

Japan's current policy interest rate is 0.50%, and it is expected to rise to 0.75% by the end of 2025. The critical point is September, and interest rates are expected to be raised by 25 basis points at that time. Although the Japanese economy is also facing some pressure, the Bank of Japan has adopted a relatively cautious strategy in controlling inflation and stabilizing the economy. The rate hike was relatively small, showing its concern that the foundation for economic recovery is not yet solid and a comprehensive consideration of factors such as exchange rate stability.

The UK's current policy interest rate is 4.50%, and it is expected to drop to 4.25% by the end of 2025. The key point is the March meeting, which is expected to stand still at that time. The British economy was affected by both the sequelae of Brexit and the slowdown in global economic growth. After weighing various factors such as economic growth, inflation, and employment, monetary policy makers chose to keep interest rates unchanged in March, and then make further adjustments according to the development of the economic situation.

Credit markets: risk rebalancing under high valuations

Currently, global credit spreads are close to their lowest level in 20 years. The market environment is complex and changing, and the trend vane for credit bond investment is also quietly changing. Based on in-depth market analysis and accurate predictions, Morgan Stanley proposed a strategy of “delaying position reduction”, providing an important reference guide for investors in the credit bond market.

Morgan Stanley believes that maintaining risk exposure in the first half of the year is a reasonable choice, but the key is to adjust positions accurately to adapt to dynamic changes in the market. In the field of increasing holdings, high-interest, low-price bonds are the first choice. Such bonds can provide relatively high returns in the current low interest rate environment, and their prices are relatively low. They have certain valuation advantages and upward potential, and can bring investors more stable cash flow and capital appreciation opportunities.

US high-yield BB-grade bonds are also a key target for increasing holdings. Currently, their interest spread is 291 basis points. The target spread is expected to narrow to 250 basis points in 2025, indicating that the market's expectations for credit risk are improving, investment value is prominent, and investors have the opportunity to obtain higher returns when credit risk is relatively manageable. Asian investment-grade bonds are also popular. Their target spread is 80 basis points. Lower spreads mean lower credit risk and relatively stable returns. In the context of increased market uncertainty, they are an ideal choice for balancing portfolio risk and return.

Regarding the area of reducing holdings, Morgan Stanley pointed out that the risk of CCC-grade high-yield bonds is gradually accumulating. The target spread will expand to 425 basis points in 2025. The increase in credit risk will reduce the investment attractiveness of this sector, and investors should reduce their holdings appropriately to avoid potential risks.

European single B-grade bonds are also included in the scope of reduction. The target interest rate spread is as high as 550 basis points, reflecting heightened market concerns about their credit situation. Against the backdrop of uneven global economic recovery and increased policy uncertainty, their risk of default may rise further. Reducing holdings of this type of bond can help optimize the credit quality of investment portfolios and reduce the overall risk level

Commodities: The Supply-Demand Game and Structural Opportunities

In terms of commodity markets, tariffs and OPEC+ production decisions have become important factors affecting the oil market. Although it was initially anticipated that OPEC+ would extend the production reduction agreement again, OPEC+ announced on March 3 that it would resume voluntary production cuts starting in April according to the previous plan. However, it said it would remain sensitive to market conditions, and production may only increase slightly from month to month rather than fully resume. Morgan Stanley's updated supply and demand situation shows that the oil market will be more relaxed than before, so the oil price forecast for 2025 was lowered to $70 per barrel (original forecast of $75).

In the gas market, European gas prices have remained high due to tight supply, but news headlines about Russia's possible resumption of gas delivery to Europe led to a 10% drop in prices last week. If a cease-fire is achieved, it is estimated that 10 billion cubic meters of Russian gas will return to the European market every year, increasing Europe's gas supply by 5%.

In the metals market, copper is the preferred basic metal, and supply growth is expected to slow in 2025 and the market positioning has been cleared; the uranium market is optimistic because contract activity may improve and supply is disappointing; silver has more room to rise than gold due to strong physical demand and falling yields; and there is a moderately bearish attitude on nickel, aluminum, and lead, which may put pressure on aluminum due to the reversal of nickel supply cuts and falling alumina prices.

Core conclusion: Grasp convergence and differentiation

In the 2025 investment market, Morgan Stanley emphasized the main lines of “global policy convergence” and “regional asset differentiation”, providing investors with clear direction. Here is an in-depth analysis of the five major investment opportunities based on this main line:

Opportunities for gold and long-term bonds

Real interest rates showed a downward trend as global economic growth slowed and policy uncertainty increased. This trend provides a favorable market environment for interest rate sensitive assets. As a traditional safe-haven asset, the investment value of gold has increased significantly against the backdrop of economic instability and falling real interest rates. Investors may consider increasing the gold allocation to hedge against fluctuations in other risky assets.

At the same time, long-term bonds are also benefiting from declining real interest rates. Lower interest rates not only increase the attractiveness of long-term bonds, but may also bring opportunities for capital appreciation. For investors seeking stable returns and risk hedging, allocating long-term bonds is a good choice.

The US dollar weakens, and arbitrage opportunities for the yen, the pound and the euro

The US dollar index is under weakening pressure in 2025. This change is mainly due to expectations that the Fed will cut interest rates and the background of global policy convergence. The US dollar's relative weakness provides investors with an opportunity to arbitrage in foreign exchange.

Specifically, shorting the US dollar and increasing the holdings of non-US currencies such as yen, pound, and euro may reap benefits from exchange rate fluctuations. Currencies such as yen and pound have shown strong safe-haven properties and value-added potential in specific economic and policy environments. Investors can use foreign exchange trading tools to flexibly adjust the allocation of foreign exchange assets and grasp this market trend.

Structural shortages and excess gains in copper and uranium

In the commodity market, copper and uranium are expected to be sources of excess earnings due to a mismatch between supply and demand. The copper market is facing a slowdown in supply growth, while global demand for electrification and infrastructure construction continues to grow. This imbalance between supply and demand will support copper prices and provide investors with medium- to long-term investment opportunities.

The uranium market is also worth watching. Demand for uranium is expected to rise as the global nuclear power industry recovers and demand for clean energy increases. Meanwhile, the supply of uranium is relatively stable and limited, and the mismatch between supply and demand will drive uranium prices to rise. Investors can consider investing in the copper and uranium markets through relevant funds or derivatives.

Cautiously sink down and focus on high-quality assets with high interest rates

When it comes to the credit market, Morgan Stanley advises investors to take a cautious approach. The overall market environment requires investors to pay more attention to credit risk control. Specifically, low-rated tail risk assets should be avoided; these assets may face a greater risk of default during market fluctuations and economic downturns.

Instead, focusing on high-quality assets with high interest rates is a more prudent strategy. These assets not only provide relatively high returns, but also have good credit quality and liquidity. Investors can select bonds issued by companies with stable cash flow and good credit history through in-depth research and screening to achieve a balance of return and risk.

Regional asset differentiation: grasping the investment characteristics of different regions

In the context of global policy convergence, asset performance in different regions will diverge. Investors need to develop differentiated investment strategies based on the economic situation, policy trends and market characteristics of each region.

In terms of the US market, despite the slowdown in economic growth, its stock market still has certain investment opportunities, driven by new policy expectations and corporate profit growth. In particular, industries supported by policies and favorable economic restructuring may show strong resilience.

The European market, on the other hand, is affected by Germany's large-scale fiscal plan, and there is an upward risk to the Eurozone economy. Investors can focus on non-Chinese exposure stocks in the European market, as well as related sectors benefiting from increased defense spending and a recovery in internal demand.

The Japanese market is a major highlight in 2025, and the economic growth rate is expected to increase further. In the Japanese stock market, against the backdrop of continued inflation and steeper yield curves, sectors such as banking, insurance, and real estate have good investment value.

Emerging markets are the least promising markets for Morgan Stanley due to the risk of increased trade tension. Investors should be cautious when allocating to emerging markets and pay attention to risk control and asset quality.

In short, the 2025 investment market is full of challenges and opportunities. Investors need to keep up with global policy developments, adjust their portfolios flexibly, and effectively manage risks while seizing the opportunities brought about by policy convergence and regional asset differentiation, and achieve steady asset appreciation.