5 min read I Date: 31 July 2023
|MSCI Asia Pac ex-Japan||2.5%||4.5%||
|Shanghai Shenzhen CSI 300 Index||4.5%||4.0%||3.1%||-21.6%|
|Hang Seng Index||4.4%||3.9%||0.7%||-15.5%|
|Shanghai Stock Exchange Composite Index||3.4%||2.7%||6.0%||-15.1%|
|Bberg Barclays Global Agg Index||-0.3%||0.5%||2.2%||-16.2%|
|JPM Asia Credit Index-Core||0.0%||0.3%||4.8%||-13.0%|
|Asia Dollar Index||0.2%||1.3%||-1.8%||-6.9%|
|Malaysia Corporate Bond Index||-0.02%||0.32%||4.54%||1.51%|
Top Performing Principal Funds (monthly as of 30 June 2023)
|Principal Greater Bay SGD-H||1.8%||1.4%||1.3%||-20.0%|
|Principal Greater China Equity||1.3%||-0.4%||2.5%||-19.8%|
|Principal Lifetime Bond Fund||0.1%||-0.4%||1.3%||-2.7%|
|Principal Islamic Lifetime Sukuk Fund||0.1%||-0.5%||1.8%||-2.9%|
Source: Bloomberg, market data is as of 28 July 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 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 Hang Seng Index chalking up the most significant gains, while South Korea showed a marginal negative return.
In Malaysia, the performance of FBMKLCI closed positively, supported by improving regional sentiment as well as favourable inflation and hope for a soft landing.
In bond market, the price of the benchmark 10-year U.S. Treasury note closed marginally lower with the long-term yield rise higher on the strong growth signals, despite the initially reassuring inflation data that had helped push down U.S. Treasury yields at the start of the week. (Bond prices move in the opposite direction of bond yields)
In the US, reports emerged with recent data suggesting that the economy might manage a soft landing even as borrowing costs increased. The Fed announced a 0.25% rate hike following the conclusion of its two-day policy meeting on Wednesday, a move that was widely expected. 2
The European Central Bank (ECB) raised interest rates to their highest level in years, reaching 3.75% due to euro area inflation staying high for too long, as expected. However, the ECB also signaled a willingness to remain flexible about future rate decisions, suggesting that a pause in monetary tightening could be on the horizon. 3
In China, amidst a sluggish economic recovery post-lockdown, the recent July Politburo meeting saw the government pledge to provide stimulus to boost domestic consumption. Officials also vowed to enhance support for the ailing real estate sector following the Politburo’s latest meeting. In other news, China's industrial profits showed a slower decline in June, falling by 8.3% Y-o-Y compared to May's 12.6% drop. Despite improving manufacturing activity, profits remain under pressure due to the risk of deflation. 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 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 and positioned in the areas of a) bottoming of the tech hardware cycle; b) long term growth headroom from low penetration rates, e.g., India; c) ASEAN continue to provide a combination of recovery plays and long-term structural themes; and d) China’s reopening, although we are judicious in which areas.
- We also favour income-focused approach to ride out volatilities arising from geopolitical tensions, inflationary issues, and recessionary concerns.
1 Bloomberg, 28 July 2023
2 Bloomberg, Bureau of Labor Statistics (BLS), US Federal Board, 28 July 2023
3 S&P Global Bank of England (ECB), 28 July 2023
4 Bloomberg, National Bureau of Statistic China, 28 July 2023
5 Principal view, 28 July 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.