5 min read I Date:13 February 2023
|MSCI Asia Pac ex-Japan||USD||-2.2%||1.4%||7.1%||-19.7%|
|Bberg Barclays Global Agg Index||USD||-1.6%||0.1%||1.8%||-16.2%|
|JPM Asia Credit Index-Core||USD||-1.3%||1.3%||3.1%||-13.0%|
|Asia Dollar Index||USD||-0.5%||-0.4%||1.0%||-6.4%|
|Malaysia Corporate Bond Index||MYR||-0.30%||1.43%||1.99%||1.51%|
Top Performing Principal Funds
|Principal Global Sustainable Growth MYR Hedged||MYR||1.3%||5.8%||7.9%||-18.8%|
|Principal Islamic Global Selection Moderate Conservative MYR||MYR||0.6%||0.8%||0.5%||-1.6%|
|Principal Asian Dynamic Bond MYR||MYR||0.3%||-1.2%||-1.2%||-4.7%|
Source: Bloomberg, market data is as of 10 February 2023
*Top performing funds were based on weekly performance.
*Past performance is not an indication of future performance.
- The market rally this year thus far has been impressive. However, last week uncertainty and volatility returned to the markets. In Developed Markets, the United States (U.S.) and Europe markets ended lower while Japan rose for the week.
- Asian markets registered negative returns for the week, with China’s onshore and offshore markets posting the largest drop.
- The FTSE Bursa Malaysia KLCI (FBM KLCI) ended lower for the week, but sentiment rebounded on Friday as market participants cheered the better-than-expected 2022 GDP (gross domestic products) data.
- Global bonds returned negatively for the week, with the yield on the benchmark 10-year U.S. Treasury note rising as investors digest the recent strong labour data that may suggest the resumption of aggressive interest rate policy (Note: Bond prices and yields generally move in opposite directions).
- In the U.S., the most significant stock-specific event was a plunge in Alphabet shares after its artificial intelligence (AI)-based chatbot made a mistake in its first public demo.1 The upside surprise in the January payrolls report also prompted fears that the U.S. Federal Reserve (Fed) would need to push the economy into recession in order to tame inflation.1
- In Europe, several European Central Bank (ECB) policymakers reasserted their hawkish stance in the wake of the most recent rate-setting meeting, warning against complacency in the fight against inflation.2 The recent official data pointed out that the United Kingdom (U.K) narrowly avoided a recession in 2022, with GDP coming in flat in the final three months of last year (A recession is commonly defined as a general decline in economic activity).2
- In China, the financial markets retreated sparked by the recent controversy around the spy balloon which added tensions with the U.S., raising the prospect of further sanctions on China from the U.S. after the Biden administration announced a sweeping ban on U.S. companies selling advanced semiconductors to China.3
Overall, the path ahead may still be volatile in the form of central bank tightening, economic slowdown, and geopolitical conflicts. However, we believe markets over time will be stabilised and positioned for a more sustainable recovery. Our broad strategy continues to favour selective approaches, and focus on the themes of Quality Growth, Income and Sustainability.
- On equities, we prefer quality factors as the macro and geopolitical backdrop remain uncertain. We are positive on Asia as sector earnings are poised to be rerated supported by China’s rapid reopening.
- On Fixed Income, our preference remains on investment grade and that of longer duration. As we foresee volatility to stay elevated, we are keeping a bias for higher quality credit. We like bonds with an investment grade rating, ideally in the AA or A, and which could operate in a business that is somewhat immune to the economic cycle.
- For medium to long-term exposure, we prefer assets that offer structural opportunities. The shift towards energy, environmental, food, and technological security are likely to be among the key long-term growth drivers in the years to come.
1Bloomberg, 10 February 2023
2European Central Bank (ECB), 10 February 2023
3Bloomberg, The Wall Street Journal, 9 February 2023
4Principal view, 13 February 2023
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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.