5 min read I Date:6 March 2023
|MSCI Asia Pac ex-Japan||1.5%||-5.5%||3.5%||-19.7%|
|Shanghai Shenzhen CSI 300 Index||1.7%||-0.3%||6.7%||-21.6%|
|Hang Seng Index||2.8%||-5.0%||4.0%||-15.5%|
|Shanghai Stock Exchange Composite Index||1.9%||2.0%||7.7%||-15.1%|
|Bberg Barclays Global Agg Index||0.0%||-3.7%||-0.3%||-16.2%|
|JPM Asia Credit Index-Core||-0.2%||-2.8%||1.5%||-13.0%|
|Asia Dollar Index||0.7%||-1.7%||-0.2%||-6.4%|
|Malaysia Corporate Bond Index||-0.5%||-0.7%||2.0%||1.5%|
Top Performing Principal Funds
|Principal Greater China Equity||3.5%||-1.7%||7.6%||-19.8%|
|Principal China Multi Asset Income USD||2.0%||-5.6%||1.5%||-29.7%|
|Principal Institutional Bond 7||0.2%||0.2%||1.5%||1.5%|
Source: Bloomberg, market data is as of 3 March 2023
*Top performing funds were based on weekly performance.
*Past performance is not an indication of future performance.
- Global financial markets regained some ground over the week as investors looked pass concerns on interest rates and focused on signs of improving economic outlook. In Developed Markets, the United States (U.S.), Europe, and Japan markets gained over the week.
- In Asia, majority of the stock market rose for the week, with Chinese stocks rose for the second week ahead of the National People Congress (NPC) meeting as investors anticipate new catalysts from the government.
- The FTSE Bursa Malaysia KLCI (FBM KLCI) closed marginally even for the week driven by ongoing uncertainty over global interest rate hikes and economic outlook.
- In bond market, the value of global bonds closed marginally lower over the week, with the yield on the benchmark 10-year U.S. Treasury rising around the 4.00% range as expectation for more interest rate hikes lingers. (Note: Bond prices and yields generally move in opposite direction).
- In U.S., the manufacturing sector was contracting at a slower rate. The Institute for Supply Management’s manufacturing Purchasing Managers’ Index (PMI) ticked higher in February for the first time since May 2022, although it remained in contraction territory at 47.7. The services PMI fell slightly but still indicated moderate expansion (55.1). (levels below 50 indicate slowing activity).2
- In Europe, inflation eased in February to an annual rate of 8.5% from 8.6% the previous month. However, core inflation (excluding volatile food and energy costs) ticked up to 5.6% from 5.3%. The European Central Bank indicated that a further half-point interest rate increase would likely be forthcoming at the 16 March 2023 meeting.3
- In China, the NPC meeting will take place on Sunday, 5 March 2023, and is expected to last about one week. The meeting occurs every five years and is closely watched for signals about economic policy shifts and any senior leadership changes. China’s official manufacturing PMI data rose to 52.6 in February from January’s 50.1. The non-manufacturing PMI increased to 56.3 from 54.4 the previous month.1
Overall, the path ahead may still be volatile in the form of central bank tightening, persistent inflation, and economic slowdown. However, we believe markets over time will be stabilised and positioned for a more sustainable recovery. Our broad strategy continues to favour selective approaches, and focus on the themes of Quality Growth, Income and Sustainability..
- On equities, we prefer quality factors as the macro and geopolitical backdrop remain uncertain. We are positive on Asia as sector earnings are poised to be rerated supported by China’s rapid reopening.
- On Fixed Income, our preference remains on investment grade and that of longer duration. As we foresee volatility to stay elevated, we are keeping a bias for higher quality credit. We like bonds with an investment grade rating, ideally in the AA or A, and which could operate in a business that is somewhat immune to the economic cycle.
- For medium to long-term exposure, we prefer assets that offer structural opportunities. The shift towards energy, environmental, food, and technological security are likely to be among the key long-term growth drivers in the years to come.
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1Bloomberg, 3 March 2023
2US Department of Commerce, 3 March 2023
3European Central Bank (ECB), 3 March 2023
4Principal view, 3 March 2023
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.