5 min read I Date:20 March 2023
|MSCI Asia Pac ex-Japan||0.6%||-4.5%||0.1%||-19.7%|
|Shanghai Shenzhen CSI 300 Index||-0.2%||-1.9%||2.3%||-21.6%|
|Hang Seng Index||1.0%||-5.8%||-1.3%||-15.5%|
|Shanghai Stock Exchange Composite Index||0.6%||0.8%||5.2%||-15.1%|
|Bberg Barclays Global Agg Index||1.6%||1.8%||2.6%||-16.2%|
|JPM Asia Credit Index-Core||0.7%||0.7%||2.6%||-13.0%|
|Asia Dollar Index||0.5%||-0.4%||-0.3%||-6.4%|
|Malaysia Corporate Bond Index||0.1%||0.4%||2.2%||1.5%|
Top Performing Principal Funds (1 week)
|Principal Global Technology USD||5.8%||-0.2%||13.6%||-46.1%|
|Principal Biotechnology Discovery USD||4.2%||-4.1%||-1.2%||-12.7%|
|Principal Asia Dynamic Bond MYR||0.6%||1.2%||0.8%||-4.7%|
Source: Bloomberg, market data is as of 17 March 2023
*Top performing funds were based on weekly performance.
*Past performance is not an indication of future performance.
- The global financial market weakened owing to pressures on the banking sector after the failure of Silicon Valley Bank (SVB) and Signature Bank, while First Republic Bank required a huge deposit injection before some form of stability emerged. Over in Europe, the Swiss National Bank (SNB) provided Credit Suisse with huge liquidity backstop to contain further market gyrations. In developed markets, the United States (US) closed marginally positive while Europe and Japan declined over the week.
- In Asia, majority of the markets experienced weakness. Chinese stocks closed the week on a mixed note, following a volatile period as global banking concerns offset optimism about economic recovery and further monetary support from Beijing via a 0.25% cut in the Reserve Requirement Ratio (RRR).
- In Malaysia, the FTSE Bursa Malaysia KLCI (FBM KLCI) recorded marginal decline for the week despite a price recovery in global bank counters as key central banks rolled out more decisive supports.
- In the bond market, the value of global bonds gained marginally over the week, while the yield on the benchmark 10-year U.S. Treasury declined sharply due to lower growth expectation and risk aversion. (Note: Bond prices and yields generally move in opposite direction).
- In the US, concerns grew after the failures of the Silicon Valley Bank and Signature Bank. Anxiety spread to other banks, including First Republic Bank and Credit Suisse in Europe. However, recent actions by the Federal Deposit Insurance Corporation and the U.S. Federal Reserve (Fed) have solved liquidity-related risks for US banks and US branches of foreign banks.2
- In Europe, the banking sector experienced a sell-off, and UBS has agreed to a $3.2 billion takeover of Credit Suisse. The European Central Bank stuck to a half-point rate hike to combat inflation, despite acknowledging that downside risks to the economy have increased. Future policy moves will depend on data.3
- In China, the People's Bank of China announced a 25-basis point cut in the RRR for most banks. In addition, new home prices in China's largest cities rose by 0.3% in February, the fastest increase since July 2021.4
Due to the escalation of risk, diversification became even more crucial in order to reduce portfolio risk, in line with our house strategy for long-term investment success. Overall, the path ahead may still be volatile in the form of inflation and poorer economic prospect. However, we believe markets over time will stabilise and be positioned for a more sustainable recovery. Our broad strategy continues to be selective with focus on the themes of Quality, Income and Sustainability.
- On equities,we prefer quality names 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.
1 Bloomberg, 17 March 2023
2 Bloomberg, US Federal Board, 17 March 2023
3 Bloomberg, European Central Bank (ECB), 17 March 2023
4 National People’s Congress (NPC), 17 March 2023
5 Principal view, 17 March 2023
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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.