5 min read I Date: 4 September 2023
|MSCI Asia Pac ex-Japan||USD||2.3%||-5.7%||
|Shanghai Shenzhen CSI 300 Index||CNY||2.2%||-5.2%||-2.1%||-21.6%|
|Hang Seng Index||HKD||2.4%||-8.1%||-7.1%||-15.5%|
|Shanghai Stock Exchange Composite Index||CNY||2.3%||-4.8%||1.4%||-15.1%|
|Bberg Barclays Global Agg Index||USD||0.6%||-1.1%||-0.3%||-16.2%|
|JPM Asia Credit Index-Core||USD||0.7%||-0.9%||4.1%||-13.0%|
|Asia Dollar Index||USD||0.3%||-1.4%||-3.5%||-6.9%|
|Malaysia Corporate Bond Index||MYR||0.15%||0.34%||4.91%||1.51%|
Top Performing Principal Funds (1 month return as of 31 August 2023)
|Principal Malaysia Enhanced Opportunities Fund||2.9%||4.5%||4.1%||-4.2%|
|Principal Malaysia Opportunities Fund||-2.0%||4.5%||3.7%||-3.9%|
|Principal Small Cap Opportunities Fund||2.0%||4.0%||6.6%||-13.3%|
|Principal Asia Dynamic Bond Fund - Class MYR||0.1%||1.1%||2.1%||-4.7%|
|Principal Islamic Lifetime Sukuk Fund||0.1%||0.4%||4.8%||1.1%|
|Principal Lifetime Bond||0.1%||0.4%||4.8%||1.3%|
Source: Bloomberg, market data is as of 1 September 2023.
*As we emphasise a long-term focus, the top performing funds were selected based on their monthly performance.
*The numbers may show as negative if there is no positive return for the period under review.
*Past performance is not an indication of future performance.
The global financial markets concluded the week on a positive note, registering overall gains. Notably, the developed markets, including the United States (US), Europe, and Japan, exhibited positive rebounds following the decline observed in the previous week.
Across Asia, the majority of markets experienced positive returns during the week. Notably, China's onshore and offshore market recorded the largest gain.
The FBMKLCI in Malaysia recorded a positive return for the week, in sync with the upbeat regional market performance ahead of a key US jobs report on Friday.
In the bond market, the price of the benchmark 10-year U.S. Treasury note exhibited positive trend with yield moving lower, driven by the positive tone from the US Federal Reserve committees regarding the narrative of interest rates. (Bond prices move in the opposite direction of bond yields)
In the US, the latest report with labour data shows mixed signals. The labour department reported employers added 187,000 jobs in August, surpassing expectations, but revisions lowered gains by 110,000 for the previous two months. Additionally, the unemployment rate climbed from 3.5% to 3.8% to reach its highest point since February 2022.2
In Europe, the annual inflation rate held steady at 5.3% in August, based on Eurostat's preliminary estimate. This slightly exceeded economists' expectations of 5.1%, as indicated by a FactSet poll. The core inflation rate, excluding volatile food and energy costs, met expectations with a reading of 5.3%—a 20-basis-point improvement from July.3
In China, sentiment recovered as the government implemented a series of stimulus measures aimed at revitalising the economy. The central bank of China reduced the foreign exchange reserve requirement ratio from 6.0% to 4.0%. These actions followed the announcement by China's financial regulator to decrease minimum down payments for homebuyers nationwide and encourage lenders to lower rates on existing mortgages.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, particularly in the technology sector, and believe that Asian equities and fixed income present more value in the short term.
- On Fixed Income, we find bonds appealing as we perceive a higher likelihood that central bank hiking cycles will end soon, despite recent guidance from the Fed. 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.
- On equities, we favour quality and dividend-paying stocks for their defensive qualities that can help withstand the uncertain macroeconomic and geopolitical conditions. We are positive on Asia and positioned in the areas of a) bottoming of the tech hardware cycle; b) long term growth headroom from low penetration rates, e.g., India; c) ASEAN continue to provide a combination of recovery plays and long-term structural themes; and d) China’s reopening, although we are judicious in which areas.
- We also favour income-focused approach to ride out volatilities arising from geopolitical tensions, inflationary issues, and recessionary concerns.
1 Bloomberg, 1 September 2023
2 Bloomberg, Bureau of Labor Statistics (BLS), S&P Global, US Federal Board, 1 September 2023
3 S&P Global, ECB, Factset, Bank of England (BoE), 1 September 2023
4 Bloomberg, National Bureau of Statistic China, 1 September 2023
5 Principal view, 1 September 2023
What to do next?
- If you need any investment assistance, please get in touch with your financial consultant. (We can help you find one). They can assist you with your investment goals and advice you on your risk tolerance.
- Alternatively, you can also manage your portfolio on-the-go, anytime, anywhere via our online investment portal.
- If you need further assistance, please leave your details here, and we will connect with you.
Disclaimer: We have based this document on information obtained from sources we believe to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness, or correctness. Expressions of opinion contained herein are those of Principal Asset Management Berhad only and are subject to change without notice. This document should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell Principal Asset Management Berhad’s investment products. The data presented is for information purposes only and is not a recommendation to buy or sell any securities or adopt any investment strategy. This material is not intended to be relied upon as a forecast, research, or investment advice regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment. We recommend that investors read and understand the contents of the funds’ prospectus and product highlights sheet available on the Principal website, which have been duly registered with the Securities Commission Malaysia (SC). Registration of these documents does not amount to nor indicate that the SC has recommended or endorsed the product or service. There are risks, fees and charges involved in investing in the funds. You should understand the risks involved, compare, and consider the fees, charges and costs involved, make your own risk assessment and seek professional advice, where necessary. This article has not been reviewed by the SC.