5 min read I Date: 02 October 2023
|MSCI Asia Pac ex-Japan||USD||-1.0%||-2.9%||
|Shanghai Shenzhen CSI 300 Index||CNY||-1.3%||-2.7%||-4.7%||-21.6%|
|Hang Seng Index||HKD||-1.4%||-3.6%||-10.0%||-15.5%|
|Shanghai Stock Exchange Composite Index||CNY||-0.7%||-0.8%||0.7%||-15.1%|
|Bberg Barclays Global Agg Index||USD||-0.9%||-2.6%||-2.2%||-16.2%|
|JPM Asia Credit Index-Core||USD||-0.1%||-0.7%||2.8%||-13.0%|
|Asia Dollar Index||USD||-0.2%||-0.8%||-4.4%||-6.9%|
|Malaysia Corporate Bond Index||MYR||0.10%||-0.32%||4.44%||1.51%|
Top Performing Principal Funds
(1 month return as of 30 September 2023)
|Principal Islamic Enhanced Opportunities Fund||-0.8%||0.9%||4.8%||-15.8%|
|Principal DALI Equity Growth Fund||-0.8%||0.2%||0.6%||-9.5%|
|Principal Small Cap Opportunities Fund||-1.0%||0.4%||7.1%||-13.3%|
|Principal Islamic Money Market Fund - Class AI||-0.1%||0.1%||0.8%||0.1%|
|Principal Money Market Income Fund - Class AI||0.1%||0.3%||0.6%||0.9%|
|Principal Islamic Lifetime Enhanced Sukuk Fund||0.1%||0.4%||1.7%||-6.7%|
Source: Bloomberg, market data is as of 29 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, 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).
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.
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 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)
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
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
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.
- 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 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, 29 September 2023
2 Bloomberg, Bureau of Labor Statistics (BLS), S&P Global, US Federal Board, 29 September 2023
3 S&P Global, ECB, Factset, Bank of England (BoE), 29 September 2023
4 Bloomberg, National Bureau of Statistic China, 29 September 2023
5 Principal view, 29 September 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.