Investment Implication:⁶

• History suggests that while geopolitical shocks may cause sharp but temporary drawdowns, they rarely have a lasting impact on long-term equity returns once initial uncertainty subsides. We believe it is prudent to maintain a long-term investment horizon rather than reacting to near-term market volatility. In this environment, our strategy remains focused on quality growth companies with domestic earnings exposure, complemented by investment grade bonds to provide portfolio stability amid market uncertainty.
• Global Equity: We maintain a neutral allocation to the US and Japan, downgrade Europe to a slight underweight, and maintain an underweight position in cash. We maintain off-benchmark exposures including gold, copper, materials, and Korea and Taiwan ETFs. Within developed markets, Europe and Japan remain most exposed to ongoing Middle East tensions. For Europe, the near closure of the Strait of Hormuz has driven European natural gas prices significantly higher over the past week. Unlike the US, Europe lacks energy independence, and a prolonged conflict could push inflation back above the ECB’s target and raise the risk of a stagflationary environment. The modest recovery observed in early 2026 may therefore be undermined by rising energy costs and weakening consumer sentiment. Although Japan holds relatively substantial strategic reserves (approximately 90 days), its heavy reliance on energy imports makes it equally vulnerable. A sustained rise in oil prices would weaken Japan’s terms of trade, likely weigh on the Japanese yen, and undermine the broader Japan re-rating narrative. The US is structurally better positioned to weather the current environment, owing to its relative energy independence and robust domestic oil production. However, a sustained and sharp rise in oil prices would still weigh on economic activity through higher inflation and weaker consumer spending, complicating the Federal Reserve’s policy trajectory.
• Asia ex Japan Equity: Against the backdrop of ongoing geopolitical tensions in the Middle East, near-term volatility across Asian markets is likely. As we anticipate a continued broadening of market leadership beyond technology, we have tactically added to our exposure in industrials, materials, and financials. We will continue to focus on companies exhibiting quality growth, strong free cash flow generation, and improving capital management, including selected exposures across consumer discretionary, consumer staples, gaming, and property. Within these, we favour technology and financials, alongside industrials with exposure to defence, nuclear energy, and power equipment.
• Malaysian Equity: We remain constructive on Malaysia despite prevailing geopolitical uncertainty, as the Malaysian economy continues to record above-consensus growth, accelerating to 5.7% in Q4 2025 from 5.2% in Q3 2025. Against this backdrop, we favour quality names with high domestic earnings exposure, such as REITs, consumer staples, and financials, where earnings are expected to grow in tandem with GDP. Meanwhile, rising global demand for power is expected to provide a tailwind for the utilities sector. Domestic technology firms are expected to benefit from further upward revisions to capital expenditure guidance by major hyperscalers. Key risks include an unexpected deterioration in Malaysia’s economic momentum and heightened market volatility stemming from geopolitical developments.
• Malaysia Fixed Income: Greater clarity emerged following BNM’s decision to hold the OPR unchanged at 2.75% in January 2026, with the accompanying policy statement reaffirming a neutral stance and signalling an extended rate pause. Looking ahead, we expect the OPR to remain unchanged over the near to medium term, underpinned by contained inflation and a strengthening Ringgit. We continue to favour corporate bonds, which offer more attractive carry relative to government securities. We prefer higher quality credit names with attractive valuations, with primary issuances remaining a key focus, given the more favourable yield pickup relative to the secondary market. In the government bond space, we expect market movements to be largely influenced by external factors, amid ongoing geopolitical tensions. We will look to tactically position the portfolio should further sell-offs materialise, while monitoring closely for tactical trading opportunities in this space. Overall, we will maintain a neutral to modestly overweight duration stance as we balance carry accumulation against active trading opportunities, while remaining mindful of valuation constraints and supply considerations.

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