20 October Weekly Market Recap

1. The global financial markets closed the week on a weak note, with the majority of the markets in the red. Among the developed markets, Japan experienced the largest decline, followed by Europe and the United States (US).
2. Across Asia, the markets delivered negative returns throughout the week. China's onshore and offshore market experienced the largest decline, followed by Korea and Taiwan.
3. In Malaysia, the FBMKLCI in Malaysia ended the week on a negative note driven by ongoing cautious sentiment within the regional economy. 
4. In the bond market, the price of the 10-year U.S. Treasury note closed negatively, with yield nearly touched 5% during intraday trading at the end of the week. This was driven by heavy primary issuance alongside concerns that rates will remain higher for longer. (Bond prices move in the opposite direction of bond yields)

1. In the US, Federal Reserve (Fed) Chairman Jerome Powell’s comments indicated a cautious approach to policy decision based on incoming data, the evolving outlook, and the balance of risks. Weekly jobless claims fell below 200,000 for the first time since January. September industrial production increased by 0.3% while housing sector exceeded expectation but building permits, a more forward-looking gauge, fell 4.4% in the month, the sharpest decline in 10 months.²
2. In Europe, the committees from the Europe Central Bank expressed concerns about inflation risk due to rising oil prices from the conflict in the Middle East. Meanwhile, inflation in the United Kingdom (UK) held steady at an annual rate of 6.7% in September driven by higher gasoline prices. Services inflation accelerated to 6.9%.³
3. In China, Country Garden, formerly China’s largest property developer, announced its inability to meet all offshore debt payments after it received a 30-day grace period in August. Meanwhile, China’s economy expanded 4.9% in the third quarter over a year earlier, surpassing expectation. Other data showed that parts of China’s economy may be stabilising. Retail sales rose 5.5% in September from a year earlier, Industrial production growth remained unchanged from August, and urban unemployment slightly decreased.⁴

Our current stance is neutral on both equity and fixed income, with a preference for income-focused funds. Our strategy emphasises quality, growth, and income in stocks and credits. We are exercising caution with USD assets and believe that Asian equities and fixed income present more value in the short term.

1. We find bonds appealing as we perceive a higher likelihood that central bank hiking cycle will end soon. 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. For Malaysia, the projected improvement to the budget deficit, provided in the Budget 2024, 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 benefiting from China's reopening, and e) Malaysia's growing optimism due to political stability and 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 income-focused approach to ride out volatilities arising from geopolitical tensions, inflationary issues, and recessionary concerns.