5 min read I Date: 6 June 2023
|MSCI Asia Pac ex-Japan||1.2%||-0.2%||
|Shanghai Shenzhen CSI 300 Index||0.3%||-4.2%||-0.3%||-21.6%|
|Hang Seng Index||1.1%||-4.9%||-4.2%||-15.5%|
|Shanghai Stock Exchange Composite Index||0.5%||-2.8%||4.6%||-15.1%|
|Bberg Barclays Global Agg Index||1.1%||-1.6%||1.6%||-16.2%|
|JPM Asia Credit Index-Core||0.9%||0.0%||3.8%||-13.0%|
|Asia Dollar Index||0.2%||-1.1%||-1.7%||-6.9%|
|Malaysia Corporate Bond Index||0.41%||0.43%||4.29%||1.51%|
Top Performing Principal Funds (monthly)
|Principal China Direct Opportunities MYR-CNY||0.4%||-1.1%||6.6%||-20.8%|
|Principal Malaysia Opportunities||-0.4%||-1.8%||-2.0%||-7.2%|
|Principal Institutional Bond 4||-0.2%||0.2%||1.2%||-0.4%|
Source: Bloomberg, market data is as of 2 June 2023.
*As we emphasize 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 week.
*Past performance is not an indication of future performance.
The global financial markets recorded a solid performance over the week. Developed markets, in particular the United States (US), Europe, and Japan, recorded positive gains.
In Asia, the markets were mostly positive over the week, with China onshore and offshore markets closing positively, while Korea led with the largest gains.
In Malaysia, market performance was weak over the week, driven by selling pressure in blue chips. This weak performance was in contrast to the rising regional sentiment, which followed the passing of the US debt ceiling bill in the House of Representatives overnight. The bill would avert a government default.
The yield on the benchmark 10-year U.S. Treasury note decreased over the week in response to encouraging inflation signals and the finalisation of a debt ceiling agreement in the bond market. (Bond prices move in the opposite direction of bond yields)
Reports emerged in the US that the White House and Republican congressional leaders had agreed to raise the federal debt limit and prevent a default on governmental obligations. Additionally, the Institute for Supply Management's May Purchasing Managers' Index showed a seventh consecutive monthly contraction in factory activity, which was a positive sign for interest rates and investors.2
In Europe, headline inflation slowed to an annual 6.1% in May from 7.0% in April, below a FactSet consensus estimate of 6.3%. The core rate, which excludes volatile food and fuel prices, also showed improvement from the prior month at 5.3%, below expectations.3
In China, the official manufacturing PMI fell to 48.8 in May from April's 49.2, marking a second straight month of contraction. The non-manufacturing PMI eased to 54.5 in May from 56.4 in April, but the private Caixin/S&P Global survey rose to 50.9 in May from April's 49.5 as output and new orders hit a nearly one-year high. Additionally, new home sales by China's top 100 developers rose 6.7% YoY in May, indicating a slow, albeit steady, post-pandemic recovery.4
Market narratives have been constantly changing as investors evaluate the latest economic developments. Despite persistent volatility, we believe that patience among investors could potentially pay off in the long run. To ride through the global uncertainties, investors are recommended to consider high-quality income focus investment products. Our broad strategy remains focused on selectivity, prioritising the characteristics of quality, growth, and income.
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 US Federal Reserve (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 as sector earnings are poised to be rerated supported by China’s rapid reopening.
We also favour income-focused approach to ride out volatilities arising from geopolitical tensions, inflationary issues, and recessionary concerns.
1 Bloomberg, 2 June 2023
2 Bloomberg, Bureau of Labor Statistics (BLS), US Federal Board, 2 June 2023
3 S&P Global Bank of England (ECB), 2 June 2023
4 Bloomberg, National Bureau of Statistic China, 2 June 2023
5 Principal view, 2 June 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.