29 September Weekly Market Recap

1. The global financial markets closed the week on a mixed 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 majority of markets delivered negative returns throughout the week, with Thailand emerging as the largest drag, followed by onshore and offshore China.

3. The FBMKLCI in Malaysia recorded a slight negative return for the week, 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 slightly lower due to a recent selloff driven by expectations of the US Federal Reserve (Fed) maintaining high interest rates and increasing supply amid mounting deficits. (Bond prices move in the opposite direction of bond yields)

1. In the US, reports emerged about the possibility of a government shutdown as the fiscal year end approached without any spending deal also weighed on investor sentiment. The core Personal Consumption Expenditures (PCE) Price Index, excluding volatile food and energy categories, rose 3.9% from the previous year—a two-year low but still below the central bank's 2% target. This represents a moderation from July's upwardly revised 4.3% annual inflation rate.²

2. In Europe, European Central Bank (ECB) officials have reaffirmed their commitment to maintaining a restrictive monetary policy to bring inflation back to the 2% target. Consumer prices rose 4.3% annually in September, the slowest pace in two years and below expectations, showing a notable improvement from August's 5.2%.³

3. In China, the official data for August released earlier in September indicated a positive trend in the economy. Industrial production and retail sales surpassed forecasts, while unemployment unexpectedly decreased. However, fixed-asset investment growth fell short of expectations due to a sharper decline in property investment.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.

1. 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.
    
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 and the New Industrial Master Plan 2030.
    
3. We also favour income-focused approach to ride out volatilities arising from geopolitical tensions, inflationary issues, and recessionary concerns.