13 September 2024 Weekly Market Recap

5 min read     I     Date: 17 September 2024

Market Data
 

Asset Class Currency1-wk1-mthYTD2023
       
Equities      
MSCI World USD3.3%3.9%14.8%21.7%
S&P 500 USD4.0%3.6%18.0%24.2%
Nasdaq USD5.9%2.7%16.0%53.8%
Russell 2000 USD4.4%4.3%7.7%15.1%
Stoxx 600-Europe EUR1.8%2.9%7.8%12.7%
Nikkei 225 JPY0.5%1.0%9.2%28.3%
MSCI Asia Pac ex-Japan USD0.9%2.4%7.8%4.5%
ASEAN USD1.5%10.0%11.9%-3.1%
Shanghai Shenzhen CSI 300 Index CNY-2.2%-5.5%-7.8%-11.4%
Hang Seng Index HKD-0.1%1.9%2.6%-13.7%
Shanghai Stock Exchange Composite Index CNY-2.2%-6.2%-9.0%-3.7%
FBMKLCI MYR1.0%3.9%14.8%-2.8%
Fixed Income      
Bberg Barclays Global Agg Index USD0.4%2.4%3.5%5.7%
JPM Asia Credit Index-Core USD0.4%1.8%7.0%9.9%
Asia Dollar Index USD0.1%1.5%-0.2%-1.5%
Bloomberg Malaysia Treasury - 10 Years MYR0.2%0.3%3.5%6.4%
       
Top Performing Principal Funds
 
      
Equities   1-mth as of (31 August 2024) YTD as of (31 August 2024) 
Principal ASEAN Dynamic USD   3.3616.62 
Principal Asia Pacific Renewables MYR   3.1812.95 
Principal Global Millennial Equity Class USD
 
   2.3810.76 
Balanced
 
      
Principal Islamic Global Selection Moderate USD   5.163.39 
Principal Islamic Global Selection Mdt Csv USD   5.113.49 
Principal China Multi Asset Income USD
 
   1.485.83 
Fixed Income
 
      
Principal Islamic Global Sukuk USD   2.41-0.09 
Principal Asia Dynamic Bond MYR   2.081.03 
Principal Global Income USD   1.224.94 


Source: Bloomberg, market data is as of 13 September 2024.
*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.
*The fund performance was referenced from the daily performance report, data was extracted from Lipper.
*The performance figures are based on the fund’s respective currency class.
*Past performance is not an indication of future performance.
 

Market Review1

  1. This week, global financial markets experienced mixed returns. Among developed markets, the US saw the most significant gains, followed by Japan and Europe.
     
  2. Across Asia, performance was mixed. India led the region in gains, while both onshore and offshore markets of China faced the largest declines. In Malaysia, the FBMKLCI closed marginally negative amidst cautious sentiment in the regional market.
     
  3. In the bond market, the US 10-year Treasury yield approached the 3.6% mark as markets as market weighed the latest inflation data and considered the outlook for interest rates. (It's worth noting that bond prices move in the opposite direction of bond yields.)

Macro Factors

  1. In the United States, the annual inflation rate slowed for a fifth consecutive month to 2.5% in August, the lowest since February 2021, down from 2.9% in July and below forecasts of 2.6%. Meanwhile, core inflation steadied at an over three-year low of 3.2%, but the monthly core inflation rate edged up to 0.3% from 0.2%, attributed to higher shelter costs.2
     
  2. In Europe, the ECB cut the deposit facility rate by 25 bps to 3.5% to ease monetary policy restrictions, reflecting an updated inflation outlook and better transmission of policy. Also, the interest rates on the main refinancing operations and the marginal lending facility were lowered to 3.65% and 3.90% respectively staring from September 18th. The ECB remains committed to bringing inflation back to its 2% target, adjusting rates based on data and economic conditions without committing to a specific rate path.3
     
  3. In China, the trade surplus widened in August as exports grew more than expected, while imports missed forecasts. Exports increased by 8.7% yoy in August, the most since March 2023, reaching a 23-month peak of USD 308.65 billion, exceeding forecasts and accelerating from a 7.0% rise in July. It marked the fifth straight month of growth, supported by foreign sales despite growing trade tensions with the West. The annual inflation rate edged up to 0.6% in August from 0.5% in July, falling short of market forecasts. Nevertheless, it was the highest point since February, marking the 7th straight month of consumer inflation, amid supply issues due to extreme heat and heavy rains. 4
     
  4. In Malaysia, industrial production advanced by 5.3% year-on-year in July, up from a 5.0% increase in the previous month and exceeding market forecasts of a 4.5% growth. Retail sales grew by 6.4% year-on-year in July, slowing from a 7.9% rise in the previous month. This marked the slowest expansion in retail activity since April. Meanwhile, the unemployment rate ticked lower to 3.3% in July from 3.4% in the same month of the previous year, remaining steady for the ninth consecutive month.5

Investment Strategy6

Volatility resurfaced recently due to soft data releases. Our base case remains for an economic soft landing in the US, with the Federal Reserve starting to ease policy at its September meeting. As markets continue to react to incoming data and headlines, we maintain the view that investors should remain invested and use the selloff to build a diversified portfolio focusing on quality. We have a slight preference for equities over fixed income. Fixed income has outperformed equities since mid-June. Asian equities look favourable with earnings growth of ~10% in 2025 and a PE of 13x.

  1. We find bonds appealing with the potential for capital gains as we perceive that the global rate-cutting cycle remain on track. 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, as provided in the Budget 2024, has 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 with high dividends in China, 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 diversification approach to ride out volatilities arising from geopolitical tensions, inflationary issues, and concerns of economic slowdown.

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Sources:
1 Bloomberg, 13th September 2024
2 Bloomberg, Bureau of Labor Statistics (BLS), ISM, S&P Global, US Federal Board, 13th September 2024
3 S&P Global, ECB, Factset, Bank of England (BoE), 13th September 2024
4 Bloomberg, National Bureau of Statistic China, CEWC, 13th September 2024
5 Department of Statistic Malaysia, S&P Global, 13th September 2024
6 Principal view, 13th September 2024

*PMI refers to Purchasing Manufacturing Index
*HCOB refers to Hamburg Commercial Bank
*NBS PMI refers to official data released by National Bureau of Statis in China
*Caixin PMI refers to data published by Caixin Media and ISH Markit. It provides alternative gauge focusing on smaller and medium-sized enterprises. 
*ECB refers to European Central Bank
*PBOC refers to People’s Bank of China
*PCE refers to Personal Consumption Expenditure
FOMC: Federal Open Market Committee
*y-o-y refers to year on year
*m-o-m refers to month on month
*UST refers to United States Treasury
*BNM refers to Bank Negara Malaysia

 

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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.