5 min read I Date: 29 May 2023
|MSCI Asia Pac ex-Japan||-1.1%||-0.6%||
|Shanghai Shenzhen CSI 300 Index||-2.4%||-2.7%||-0.5%||-21.6%|
|Hang Seng Index||-3.6%||-5.1%||-5.2%||-15.5%|
|Shanghai Stock Exchange Composite Index||-2.2%||-1.6%||4.0%||-15.1%|
|Bberg Barclays Global Agg Index||-1.1%||-2.9%||0.5%||-16.2%|
|JPM Asia Credit Index-Core||-0.5%||-1.3%||2.8%||-13.0%|
|Asia Dollar Index||-0.4%||-1.3%||-1.8%||-6.9%|
|Malaysia Corporate Bond Index||-0.16%||0.27%||3.86%||1.5%|
Top Performing Principal Funds (monthly)
|Principal Global Technology USD||2.0%||10.1%||24.6%||-46.1%|
|Principal Islamic Asia Pacific Dynamic Equity||1.6%||5.6%||7.0%||-23.6%|
|Principal Islamic Lifetime Sukuk||0.1%||0.5%||1.9%||-2.9%|
Source: Bloomberg, market data is as of 26 May 2023.
*As we emphasize a long-term focus, the top performing funds were selected based on their monthly performance.
*Past performance is not an indication of future performance.
The global financial markets recorded a flattish performance over the week. Developed markets in particular the United States (US) and Europe closed with negative returns, while Japan recorded positive gains.
In Asia, the markets experienced a mixed performance over the week, with China onshore and offshore markets experiencing losses, while Korea and Thailand led the gains.
In Malaysia, market performance was weak over the week, primarily due to broader market uncertainties and concerns about a possible US government debt default.
In the bond market, the yield on the benchmark 10-year U.S. Treasury note increased slightly over the week, possibly in response to indications of a resilient consumer market and persistent inflationary pressures. (Bond prices move in the opposite direction of bond yields)
Debt ceiling negotiations resumed in the US after President Biden's return from Japan, but little progress was made, causing market decline. Meanwhile, the recent core personal consumption expenditures (PCE) price index - a key inflation metric favoured by the Federal Reserve (Fed)- rose to 4.7% year-over-year (Y-o-Y), indicating the tightening measures implemented so far do not seem to have added sufficient pressure.2
n Europe, a survey by S&P Global indicates business output grew for the fifth consecutive month in May, although the pace slowed due to weaker manufacturing. Meanwhile, European Central Bank (ECB) policymakers reiterated that interest rates must rise and remain high to control medium-term inflation.3
In China, there were no major indicators during the week. However, the country's slowing post-pandemic recovery has raised concerns about the economic outlook. Additionally, geopolitical risks affected risk appetite when Beijing announced a ban on Chinese companies buying products from Micron Technology, citing security risks. The ban would apply to domestic telecom firms, state-owned banks, and other companies behind China's information infrastructure.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.
1Bloomberg, 26 May 2023
2Bloomberg, Bureau of Labor Statistics (BLS), US Federal Board, 26 May 2023
3S&P Global Bank of England (ECB), 26 May 2023
4Bloomberg, National Bureau of Statistic China, 26 May 2023
5Principal view, 26 May 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.