5 min read I Date: 25 September 2023
|MSCI Asia Pac ex-Japan||USD||-2.3%||0.2%||
|Shanghai Shenzhen CSI 300 Index||CNY||0.8%||-0.5%||-3.4%||-21.6%|
|Hang Seng Index||HKD||-0.7%||1.5%||-8.7%||-15.5%|
|Shanghai Stock Exchange Composite Index||CNY||0.5%||0.4%||1.4%||-15.1%|
|Bberg Barclays Global Agg Index||USD||-0.5%||-0.8%||-1.3%||-16.2%|
|JPM Asia Credit Index-Core||USD||-0.6%||0.1%||3.0%||-13.0%|
|Asia Dollar Index||USD||-0.3%||-0.3%||-4.2%||-6.9%|
|Malaysia Corporate Bond Index||MYR||-0.49%||-0.29%||4.33%||1.51%|
Top Performing Principal Funds
(1 month return as of 31 August 2023)
|Principal Malaysia Enhanced Opportunities Fund||2.9%||4.5%||4.1%||-4.2%|
|Principal Malaysia Opportunities Fund||-2.0%||4.5%||3.7%||-3.9%|
|Principal Small Cap Opportunities Fund||2.0%||4.0%||6.6%||-13.3%|
|Principal Asia Dynamic Bond Fund - Class MYR||0.1%||1.1%||2.1%||-4.7%|
|Principal Islamic Lifetime Sukuk Fund||0.1%||0.4%||4.8%||1.1%|
|Principal Lifetime Bond||0.1%||0.4%||4.8%||1.3%|
Source: Bloomberg, market data is as of 22 September 2023.
*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.
*Past performance is not an indication of future performance.
The global financial markets closed the week on a mixed note. In the developed markets, Japan experienced the largest decline, followed by Europe and the United States (US).
Across Asia, the majority of markets delivered mixed returns throughout the week. China onshore recorded the highest gain, while South Korea and Taiwan experienced the largest decline.
The FBMKLCI in Malaysia recorded a slight negative return for the week, driven by ongoing cautious sentiment within the regional economy.
In the bond market, the price of the benchmark 10-year U.S. Treasury note closed slightly lower, influenced by the flood of new government bond issuance and the continued strength of the US economy. (Bond prices move in the opposite direction of bond yields)
In the US, the Federal Open Market Committee (FOMC) recently held its monetary policy unchanged at a target range of 5.25% to 5.50%. The committee also indicated that interest rates would remain higher for an extended period, with the possibility of one more rate hike in 2023.2
In Europe, the Bank of England (BoE) announced on Friday that it has held interest rates unchanged at 5.25% as economic momentum slows. The latest Manufacturing PMI came in at 43.4 in August, driven by declining orders in the private sectors. On the other hand, the services sector edged higher to 48.4 but still marked the second consecutive contraction.3
In China, recent data suggests indications of economic stability, and the government has made a commitment to expedite measures that will bolster the country's recovery and sustain growth in 2024. In terms of monetary policy, Chinese banks have maintained their one- and five-year loan prime rates unchanged. This decision follows the prior week's announcement by the People's Bank of China (PBOC) to keep its medium-term lending facility rate steady. Additionally, the PBOC has reduced the reserve requirement ratio (the amount of cash banks must hold as reserves) for the second time this year.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, particularly in the technology sector, and believe that Asian equities and fixed income present more value in the short term.
- 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 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 and the New Industrial Master Plan 2030.
- We also favour income-focused approach to ride out volatilities arising from geopolitical tensions, inflationary issues, and recessionary concerns.
1 Bloomberg, 22 September 2023
2 Bloomberg, Bureau of Labor Statistics (BLS), S&P Global, US Federal Board, 22 September 2023
3 S&P Global, ECB, Factset, Bank of England (BoE), 22 September 2023
4 Bloomberg, National Bureau of Statistic China, 22 September 2023
5 Principal view, 22 September 2023
What to do next?
- If you need any investment assistance, please get in touch with your financial consultant. (We can help you find one). They can assist you with your investment goals and advice you on your risk tolerance.
- Alternatively, you can also manage your portfolio on-the-go, anytime, anywhere via our online investment portal.
- If you need further assistance, please leave your details here, and we will connect with you.
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.