1 December Weekly Market Recap

1. The global financial markets concluded the week with a majority of positive performance, with the United States (US) and Europe experienced gains among the developed markets, while Japan saw negative performance. 
2.  Across Asia, the performances were mixed across the markets, with India and Indonesia leading the way, while China onshore and offshore declined the most.  
3. In Malaysia, the FBMKLCI in Malaysia ended the week on a slightly positive note, fuelled by the ongoing cautious sentiment in the regional market. 
4. Turning to the bond market, the price of the 10-year U.S. Treasury note closed on a positive note, with yields stabilising around the 4.20% range. This was supported by healthy demand on issuance and the recent comments from the US Federal committee. (Bond prices move in the opposite direction of bond yields)

1. In the US, the annual personal consumption expenditure index (PCE), the US Federal’s preferred inflation metrics, cooled to 3% in October from 3.4% in the previous month. Additionally, the core PCE inflation, which excludes food and energy, also slowed to 3.5% from 3.7% previously. Meanwhile, the ISM Manufacturing PMI was unchanged at 46.7 in November, indicating continued contraction in the manufacturing sector due to slower demand and higher borrowing cost. ²
2. In Europe, the annual headline inflation declined to 2.4% in November, compared to 2.9% previously. Meanwhile, the core rate, which excludes volatile food and energy prices, also decreased to 3.6%, marking its lowest point since April 2022. Despite the encouraging inflation data, the recent comment by the European Central Bank reaffirms their commitment to a tightening stance.³
3. In China, the Caixin General Manufacturing PMI rose to 50.7 in November, compared to 49.5 in the prior month. Both output and buying levels returned to growth, supported by recent efforts from Beijing. Meanwhile, the official NBS Manufacturing and Services PMI edged down to 49.4 and 50.2, respectively, in November, lower than the figures in the previous month. The mixed factory activity data for China in November suggests more stimulus will be needed to support economic growth.⁴

Our current stance is neutral on both equity and fixed income, with a preference for income-focused funds. Our strategy emphasises quality, growth, and income in stocks and credits. We are exercising caution with USD assets and believe that Asian equities and fixed income present more value in the short term.

1. We find bonds appealing as we perceive a higher likelihood that central bank hiking cycle will end soon. We also see potential for capital gains in the event of weaker economic growth. Therefore, we maintain our preference for investment grade bonds with longer durations as our preferred investment choice. For Malaysia, the projected improvement to the budget deficit, provided in the Budget 2024, improved the outlook for domestic bonds.
    
2. On equities, we prefer quality and dividend-paying stocks for their defensive characteristics, which can provide resilience in the face of uncertain macroeconomic and geopolitical conditions. Our positive outlook is focused on Asia and includes strategic positions in various areas: a) the bottoming tech hardware cycle, b) long-term growth potential driven by low penetration rates (such as India), c) recovery plays and structural themes in ASEAN, d) selective sectors benefiting from China's reopening, and e) Malaysia's growing optimism due to political stability and potential gains from the New Energy Transition Roadmap, the New Industrial Master Plan 2030 and projected improvement to the budget deficit detailed in the Budget 2024.
    
3. We also favour income-focused approach to ride out volatilities arising from geopolitical tensions, inflationary issues, and recessionary concerns.