5 min read I Date:20 February 2023
|MSCI Asia Pac ex-Japan||USD||-2.2%||-2.7%||4.8%||-19.7%|
|Shanghai Shenzhen CSI 300 Index||CNY||-1.7%||-2.5%||4.2%||-21.6%|
|Hang Seng Index||HKD||-2.2%||-4.0%||4.7%||-15.5%|
|Shanghai Stock Exchange Composite Index||CNY||-1.1%||0.0%||4.4%||-15.1%|
|Bberg Barclays Global Agg Index||USD||-1.0%||-2.4%||0.8%||-16.2%|
|JPM Asia Credit Index-Core||USD||-1.2%||-0.8%||1.9%||-13.0%|
|Asia Dollar Index||USD||-0.9%||-1.7%||0.1%||-6.4%|
|Malaysia Corporate Bond Index||MYR||-0.09%||1.10%||1.99%||1.51%|
Top Performing Principal Funds
|Principal Global Global Technology USD||USD||2.2%||8.2%||15.7%||-46.1%|
|Principal Next-G Connectivity USD||USD||0.4%||3.1%||11.8%||-43.3%|
|Principal Asian Dynamic Bond MYR||MYR||0.6%||-0.1%||-0.6%||-4.7%|
Source: Bloomberg, market data is as of 17 February 2023
*Top performing funds were based on weekly performance.
*Past performance is not an indication of future performance.
- The stock market started the year on a solid footing, but uncertainties around persistent inflation and tight labour market reintroduced new waves of concerns last week. In Developed Markets, the United States (U.S.) and Japan markets ended lower while the Europe markets rose for the week.
- In Asia, the stock markets had mixed performance, with China's markets dropping for the third week in a row, both in mainland China and outside of it.
- The FTSE Bursa Malaysia KLCI (FBM KLCI) posted modest gain over the week, with sentiment reflecting global forecast for the Asian markets to remain mixed to lower on the renewed concerns over the outlook of interest rates.
- Over the week, the value of global bonds went down, with the yield on the benchmark 10-year U.S. Treasury note rising as investors digest the recent resilient labour and inflation data. The developments may suggest the resumption of aggressive interest rate policy (Note: Bond prices and yields generally move in opposite directions).
- In the U.S., the jump in retail sales, together with January's solid jobs report and a rebound in homebuilder sentiment, paints the picture of a resilient economy with positive momentum that may stall inflation progress.2
- In Europe, annualised inflation fell for a third consecutive month in January to 10.1% mainly due to easing services and fuel costs. Core inflation (excluding energy, food, alcohol, and tobacco) eased to a much lower-than-forecast rate of 5.8%. The slowdown in inflation ignites hopes that the Bank of England might opt for a smaller interest rate hike in March or skip one altogether.3
- In China, the financial markets were mire by the recent controversy around the spy balloon which added tensions with the U.S. In other news, Bloomberg reported that prices for new homes in China remained roughly steady in January, breaking a 16-month slide, as demand received a boost from the government lifting of its zero-COVID regime.1
Overall, the path ahead may still be volatile in the form of central bank tightening, persistent inflation, and economic slowdown. 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, 17 February 2023
2US Department of Commerce, 17 February 2023
3European Central Bank (ECB), 17 February 2023
4Principal view, 17 February 2023
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We 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.