For the month of November 2022, the MSCI Far East ex-Japan Index gained 21.91%, compared to the MSCI World Index’s 6.80% gain. The huge outperformance of the Far East ex-Japan markets was driven by sharp gains in Chinese risk assets. The ASEAN Index underperformed within the Asia region.

Risk assets performed positively in November. Major indices in the US gained on announcement of better-than-expected inflation data which led to expectation that it may prompt the Fed to slow down rate increase. Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned 5.67%, 5.38% and 4.37% respectively. The US October headline CPI came in at 7.7% YoY, easing from the previous month. Core prices, which exclude food and energy, reduced from a 40-year high and came to 6.3%. US 10-year yields fell from 4.05% to 3.61%, with the two-year dropping from 4.49% to 4.34%. Industrial activity slowed in November, with the flash composite purchasing manager’s index (PMI) – an indicator of business activity – retracting to 46.4 from 48.2 in October. A figure below 50 indicates slowing activity.

The Stoxx Europe 600 Index gained 6.75%. European Central Bank (ECB) raised its key interest rates by 75 basis points. Shares were supported by hopes that inflation may be moderating in the eurozone. Eurozone inflation, as measured by the consumer price index, eased to 10.0% YoY in November, from 10.6% in October. Warmer autumn weather resulted in reduced energy demand, although energy costs remain the biggest component driving higher inflation.

Hong Kong and H shares indices gained sharply, with Hang Seng Index and Hang Seng China Enterprises Index gaining 26.62% and 29.07% respectively. China’s A shares index also gained 13.11%. China’s expansionary monetary policies improved market sentiments, driving risk assets higher. In a meeting held to study measures to stabilize the economy, the State Council, chaired by Premier Li Keqiang, called for using more monetary policy tools, including cutting RRR “in a timely and appropriate manner” to better support the real economy. It also encouraged banks to offer loans to ensure a “healthy development” of property market, and called for better supports for private firms’ bond sales

South Korea’s KOSPI Index gained 7.80% on bargain hunting.  Bank of Korea (BOK) raised interest rate by 25bps to 3.25% while also cutting its 2023 growth outlook to 1.7% from 2.1% but keeping its 2022 projection intact at 2.6%. BOK Governor Rhee signaled the rate hike cycle may be coming to an end, and  suggested a terminal rate of roughly 3.5%.  Three board members saw one more hike on the horizon, while one member thought that the rates had been raised enough.

Taiwan’s TWSE Index gained 14.90% on improved investors’ risk appetite. However, Taiwan’s consumer confidence weakened in November to the lowest level in nearly thirteen years. The consumer confidence index dropped to 60.0 in November from 61.2 in the previous month

Singapore’s STI gained 6.38%. Singapore’s manufacturing production declined by 0.8% YoY in October, compared with market consensus of a 0.9% drop and after a downwardly revised 1.6% gain in September. This was the first fall in factory output since September 2021, due to a slump in biomedical manufacturing (-14.5% vs -1.4% in September), led by pharmaceuticals (-27.1%). On a monthly basis, manufacturing output rose by 0.9% in October, the third straight month of gain, defying expectations of a 0.3% fall.

Malaysia’s KLCI gained 1.95%. Inflation slowed to 4.0% YoY in October from 4.5% in

September. Core inflation rose by 0.1 percentage point to 4.1% YoY, putting it above the headline reading. While the general election did not result in any coalition party winning a majority of the seats, the subsequent formation of a Pakatan Harapan-led coalition with the Umno-led Barisan National and Sarawak’s GPS and the appointment of Anwar Ibrahim as Prime Minister is viewed positively by the market.

Thailand’s SET Index gained 1.65%. Thailand’s headline CPI eased to +6% in October as energy costs slowed while food prices finally showed signs of peaking despite concerns on the impact of floods. Core inflation inched up slightly to +3.2%. Upside pressures remain from the weaker Baht, flooding impact on food prices, and the increase in minimum wages on 1 October.

Jakarta Composite Index declined 0.25%. The Organization for Economic Co-operation and Development (OECD) cut Indonesia’s growth projection for 2023 to 4.7%, down from the previous prediction of 4.8%. The decrease was made because of the threat of a global recession next year.

The Philippines PSE Index rallied 10.20% after the sharp correction in the previous month.  Philippine Central Bank (BSP) raised its policy rate by another +75bps to 5.00%, the sixth successive hike giving a total +300bps hike so far this year. BSP raised its inflation forecast for 2022 and 2023 to +5.8% (vs. +5.6% previously) and +4.3% (vs. +4.1% previously), respectively. The inflation rate is expected to stay above BSP’s target range of 2%-4% until mid-2023.

Vietnam’s VN-Index gained 2.75% on bargain hunting. Vietnam posted a trade surplus of US$9.4 billion in the first ten months of 2022, compared to US$630 million in the same period last year, according to the General Statistics Office (GSO). In October, the country’s total export and import value was estimated at US$58.27 billion, up 0.1% MoM and 5.7% YoY.

The contraction in economic activities and slower economic growth outlook continued to worry global investors. The potential demand disruption from slower growth has started to be manifested in weaker corporate earnings guidiance. The Federal Reserve’s pronouncements of its stance on rates hikes has continued to affect investors’ sentiment and bring about trading volatility. The lower October headline CPI at 7.7% YoY, easing from the previous month improved investors’ expectation on a slow down of the pace of interest rate increase.

The corrections in recent periods present opportunity, especially in Asia ex. Japan, in particular Chinese equities on depressed valuation. The positive impacts of expansionary Chinese policies to support economic activities and  indications of changes in Covid control management policies has resulted in market interpretation as prelude to the relaxation of the zero-Covid strategy. This is viewed positively by the market.

We are watchful of developments in the Russia-Ukraine conflict as well as policy directions in the major economies, in particular US and China, which will have major implications on economies in general as well as on specific sectors.  US policy responses will continue to face headwinds going into 2022. Tapering and rate hikes in 2022 will affect liquidity and increase cost of borrowing in the system, not just in the US but world wide. In Asia, the focus is on China’s policy measures to spur economic activities and revive growth in the property sector, and the developments in China’s responses to Covid-19 situation there.

While we are more cautiously optimistic, there remains headwind for risk assets, including rising bond yields and interest rate hikes, and the relatively high commodity prices (although these have come off to some extent), as well as the still relatively high valuations in the developed markets. The heightened geo-political issues between China and US, and the tension between US/Europe and Russia over Ukraine will keep risk premium elevated at times and result in markets volatility.

We continue to apply our strategy of focusing on identifying fundamentally healthy companies with low valuations, low leverage, high growth, robust management and a strong track record, and adherence to our investment philosophy of “Never Fully Invest at All Times” which has served us well over the years. We are also in the midst of developing a robust ESG investment framework to meet the increasingly socially-aware demands of investors, as well as other stakeholders.

We thank you once again for your continued faith in us, and hope to remain good stewards in our endeavour to protect and grow your capital.

This advertisement is solely for information purposes. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. The information contained herein does not have any regard to the specific investment objectives, financial situation or particular needs of any person. Investors may wish to seek advice from a financial advisor before making any investment decision. Past performance is not indicative of future results. An investment is subject to investment risks, including the possible loss of the principal amount invested.

The best performing regional indices were Philippines (+7.18%), Korea (+6.41%) and Australia (+6.01%), while the laggards were H shares (-16.49%), A shares (-15.21%) and Hong Kong (-14.72%). Regional currencies were mixed against the USD. The best performing currencies were Singapore Dollar (+1.33 %) and Philippines Peso (+0.91 %), while the worst were Vietnamese Dong (-3.93%) and Chinese Yuan (-2.62%).

For the month of October 2022, the MSCI Far East ex-Japan Index declined 7.96%, compared to the MSCI World Index’s 7.11% gain. The huge divergence in performance was driven by sharp corrections in Chinese risk assets. The ASEAN Index performed relatively better within Asia region.

Risk assets gained in October. Major indices in the US gained on generally positive corporate earnings announcements. Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned 13.95%, 7.99% and 3.90% respectively. Economic data indicated a marked slowdown in activity. US GDP growth in Q3 was the slowest in over a year at an annualized 2.0% QoQ, down from 6.7% in Q2. A slowdown in both housing starts and home sales highlight how higher mortgage rates weighed on the sector. Flash PMI data disappointed, with the manufacturing survey falling to 49.9, its lowest level since early in the pandemic. Meanwhile, the services survey declined to 46.6, with forward looking indicators notably weak.

The Stoxx Europe 600 Index gained 6.28%. European Central Bank (ECB) raised its key interest rates by 75 basis points. Europe announced new plans to tackle the energy crisis that included a first version of a price cap and a common purchases system that will allow the EU to use its collective purchasing power to obtain better prices from suppliers. These measures, together with new fiscal stimulus support of €40bn, should help both households and businesses. The eurozone PMI surveys reached levels that are consistent with recession. October’s flash composite PMI registered a fall to 47.1, with the manufacturing index at 44.2 and services at 48.2. Euro area annual inflation was estimated at 4.1% for October, up from 3.4% in September. Meanwhile, EU’s Q3 GDP growth was 2.2%, compared to 2.1% in Q2.

Hong Kong and H shares indices declined sharply, with Hang Seng Index and Hang Seng China Enterprises Index dropping 14.72% and 16.49% respectively. China’s A shares index also declined 7.78%. China experienced a slump in consumption during the National Day holiday. According to the Ministry of Transport, the total number of passengers traveling across the country was estimated to be 256 million during the holiday period, down 36%, 41% and 58% from the same period in 2021, 2020 and 2019 respectively. The sharp decline in travelers translated into weak consumption, resulting in a drop of 26% YoY in tourism revenue to CNY 287bn. The conclusion of China’s 20th National Congress in October and the leadershsip line-up reaffirmed General Scretary Xi Jinping’s political power which was viewed negatively by foreign investors.

South Korea’s KOSPI Index gained 6.41% on bargain hunting. South Korea is redoubling efforts to shore up local credit market as yields surge to decade highs and default risks spread. Money market yields have soared since Gangwon Jungdo Development Corp., the developer of the new Legoland Korea theme park east of Seoul, missed bond payments worth 205 billion won ($144 million) due on Sept. 29.  Authorities will closely monitor the market unease. Authorities will swiftly resume buying corporate debt via a 1.6 trillion won ($1.1 billion) bond stabilization fund established in 2020 and will prepare to increase its size according to the Financial Services Commission.

Taiwan’s TWSE Index declined 3.54% on consolidation amidst weaker electronics demand outlook. Taiwan’s industrial production fell 4.8% in September, below consensus of a 0.4% increase and the prior month’s 3.68%. The decline ended 31 consecutive months of gains. Taiwan’s central bank reported a total brokerage securities account balance for September of NT$3.663tn, a significant drop of NT$160.8bn MoM, marking the second highest monthly decline in history. The M1B and M2 growth rates dropped to 6.58% and 6.83% respectively for September, indicating a lack of liquidity for the stock market.

Singapore’s STI declined 1.19%.  Singapore’s annual inflation rate was at 7.5% in September, unchanged from August’s figure of more than 14-year high, in line with market estimates. Food prices rose by 6.9%, the most since October 2008, after gaining 6.4% in August. On a monthly basis, consumer prices went up 0.4%, the least since a fall in April, slowing from a 0.9% rise in August.

Malaysia’s KLCI gained 4.71%. Malaysia’s headline inflation declined to 4.5% in September from 4.7% in August, as lower inflation in the prices of fresh chicken, fresh vegetables, and fuel more than offset higher core inflation. According to Bank Negara Malaysia (BNM), Malaysia’s pre-determined short-term outflows of foreign currency loans, securities and deposits, which include scheduled repayments of external borrowings by the government and the maturity of foreign currency BNM interbank bills, amount to US$11.18 billion (RM52.85 billion) for the next 12 months. This latest projected foreign currency outflow figure is an increase over the previous forecast of US$9.4 billion.

Thailand’s SET Index gained 1.21%. Thailand’s exports rose more than expected in September, helped by increased shipments of food and industrial goods. Consumer confidence picked up for a fourth straight month in September, hitting an eight-month high, helped by a reduction in the Covid-19 infection rate and improved business activity following the relaxation of travel restrictions. The University of the Thai Chamber of Commerce (UTCC) reported that the consumer confidence index rose to 44.6 in September from 43.7 in August. It stood at 42.4 in July, 41.6 in June, 40.2.

Jakarta Composite Index gained 0.83%. Following the recent hike in fuel price in order to cut the government subsidies on fuels, the Indonesian government will reallocate some of the fuel subsidy budget to social spending in the form of cash transfers and wage subsidy until the end of the year. However, September consumer confidence Index fell 7.5 points from the prior month to 117.2. The reading reflected a strong sentiment despite being the lowest level since April, reflecting the impact of subsidized fuel price hikes earlier in the month. The October number improved to 120.3 as the impact of the fuel price hike faded.

The Philippines PSE Index gained 7.18% on a relief rally after sharp correction in the previous month.  Headline inflation rate accelerated to +6.9% YoY in September 2022 (Aug 2022: +6.3%; 9M2022: +5.1% YoY) on the back of larger rise in food and non-alcoholic beverage costs. Core inflation eased marginally to +4.5% YoY (Aug 2022: +4.6%).

Vietnam’s VN-Index fell 9.20% on fear of systemic risk. The State Bank of Vietnam (SBV) widened the VND trading band today to +/- 5%, from +/- 3% previously. SBV decided to put Saigon Commercial Bank (SCB) under special control to ensure normal operations and liquidity. As part of the special control measure, the central bank will select experienced and qualified personnel from state-owned commercial banks including Vietcombank, BIDV, Vietinbank and Agribank to join the SCB executive board.

The contraction in economic activities and slower economic growth outlook continued to worry global investors. The potential demand disruption from slower growth has started to be manifested in weaker corporate earnings guidance. The Federal Reserve’s pronouncements of its stance on rates hikes have continued to affect investors’ sentiment and bring about trading volatility. However, we think the market has already factored in a higher interest rate environment, somewhat, although many are hoping that the hikes will stop sooner rather than later.

The corrections in recent periods present opportunity, especially in Asia ex. Japan, in particular Chinese equities on depressed valuation. The positive impacts of expansionary Chinese policies to support economic activities and improving Covid-19 situation in China would improve economic activities. The conclusion of the China’s 20th National Congress reaffirmed General Secretary Xi Jinping political power which was viewed negatively by foreign investors.  The on-going Russia-Ukraine conflict and its significant impact on energy, food and other commodities will continue to weigh on investor sentiments.

We are watchful of developments in the Russia-Ukraine conflict as well as policy directions in the major economies, in particular US and China, which will have major implications on economies in general as well as on specific sectors.  US policy responses will continue to face headwinds going into 2022. Tapering and rate hikes in 2022 will affect liquidity and increase cost of borrowing in the system, not just in the US but worldwide. In Asia, the focus is on China’s policy measures to spur economic activities and revive growth in the property sector, and how that might be impacted by China’s responses to Covid-19 situation there.

While we are more cautiously optimistic, there remains headwind for risk assets, including rising bond yields and interest rate hikes, and the relatively high commodity prices (although these have come off to some extent), as well as the still relatively high valuations in the developed markets. The heightened geo-political issues between China and US, and the tension between US/Europe and Russia over Ukraine will keep risk premium elevated at times and result in markets volatility.

We continue to apply our strategy of focusing on identifying fundamentally healthy companies with low valuations, low leverage, high growth, robust management and a strong track record, and adherence to our investment philosophy of “Never Fully Invest at All Times” which has served us well over the years. We are also in the midst of developing a robust ESG investment framework to meet the increasingly socially-aware demands of investors, as well as other stakeholders.

We thank you once again for your continued faith in us, and hope to remain good stewards in our endeavor to protect and grow your capital.

This advertisement is solely for information purposes. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. The information contained herein does not have any regard to the specific investment objectives, financial situation or particular needs of any person. Investors may wish to seek advice from a financial advisor before making any investment decision. Past performance is not indicative of future results. An investment is subject to investment risks, including the possible loss of the principal amount invested.

Source : Bloomberg

The markets in ASEAN performed relatively better within Asia region.  The best performing regional indices were Jakarta Composite Index (-1.92%), Straits Times Index (-2.84%) and Stock Exch Of Thai Index (-3.02%), while the laggards were Hang Seng China Ent Index (-13.85%), Hang Seng Index (-13.69%) and Kospi Index (-12.81%). Regional currencies were weak against the USD. The best performing currencies were Vietnamese Dong (-1.72%) and Indonesia Rupiah (-2.50%), while the worst was Korea Won (-6.52%) and Taiwan Dollar (-4.29%).

For the month of September 2022, the MSCI Far East ex-Japan Index declined 14.23%, compared to the MSCI World Index’s 9.46% decline. The markets in ASEAN performed relatively better within Asia region.

Risk assets resumed their declines in September. Major indices in the US corrected on renewed Federal Reserve’s hawkish stance, which reiterated its intention to maintain tight monetary policy to tackle soaring inflation.

Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned -8.84%,

-9.34% and -10.50% respectively, bringing the year to date losses to -20.95%, -24.77% and -32.40% respectively. US inflation, as measured by the consumer price index (CPI), increased by 8.3% YoY in August, down from 8.5% in July. However, it remains elevated. US manufacturing activity grew at its slowest pace in nearly 2-1/2 years in September as new orders contracted, as rising interest rates cooled demand for goods. The Institute for Supply Management (ISM)’s manufacturing PMI dropped to 50.9 this month, the lowest reading since May 2020, from 52.8 in August.

The Stoxx Europe 600 Index declined 6.57%. European Central Bank (ECB) raised its key interest rates by an unprecedented 75 basis points. ECB’s deposit rate is now 0.75% above zero and main refinancing rate is 1.25%, the highest level for both since 2011. The euro has been languishing around parity against the dollar for weeks and its sharp fall to two-decade lows this year adds to import costs and raises inflation. The purchasing managers’ index for the 19-nation euro zone fell to 48.4 from 49.6 in August. That marks the third consecutive month below the 50 threshold.

Hong Kong and H shares indices declined, with Hang Seng Index and Hang Seng China Enterprises Index dropping 13.69% and 13.85% respectively. China’s A shares index also declined 6.72%. The concerns on weak yuan accelerated capital outflow from Chinese equities despite rumors of Chinese regulators requesting fund managers and brokers to avoid massive equity sales ahead of Communist Party Congress in mid-October to avoid big market fluctuations. August exports increased 7.1% YoY, compared with the May-July average YoY growth of 17%-18%, significantly lower than market expectations; August imports only edged up 0.3% YoY, remaining weak in performance. The declining export growth reflected global economic slowdown and the high base in the same period last year.

South Korea’s KOSPI Index declined 12.80% amid weaker sentiment on risk aversion.  According to Finance Minister, the government is preparing several steps to stabilize the domestic financial market amidst heightened volatility and the KRW’s sharp slide against the USD, on the back of worries over global tightening and economic slowdown. On the domestic front, the Financial Services Commission has decided to extend the loan deferment program for SMEs and small businesses to help ease their payment burden.

Taiwan’s TWSE Index declined 11.07% on consolidation amidst weaker electronics demand outlook. Taiwan raised rate by 12.5 bps in September to 1.625%. August export orders rose to USD 54.59 bil, up 2.0% YoY, exceeding consensus of 1.1% growth. It remains to be seen if the upcoming peak seasonality will help offset the economic downturn.

Singapore’s STI declined 2.84%. The S&P Global Singapore PMI dropped to a five-month low of 56.0 in August from 58.0 in July, reflecting current interest rates and cost pressures. Still, the latest print marked the 21st straight month of increase in the private sector, with growth in output and new orders remaining significant and historically sharp despite softening. Singapore’s seasonally adjusted unemployment rate was at 2.1% in 2Q22, matching the flash figure and edging down from 2.2% in Q1. This was the lowest jobless rate since Q3 2018, as the economy recovered further from COVID disruptions.

Malaysia’s KLCI declined 7.77%.  Malaysia’s industrial production in July rose 12.5% from a year earlier, below the 15.2% expected based on a survey of 13 economists in a Reuter’s poll. The central bank said core inflation increased to 3.8% in August versus 3.4% in the previous month. “The increase largely reflected higher prices for rental and food away from home. Notwithstanding the higher annual inflation, 10 of the 12 main Consumer Price Index (CPI) categories registered moderating month-on-month increases,” according to BNM.

Thailand’s SET Index declined 3.02%. The cabinet approved extensions of both the diesel tax cut (THB5 per liter) for two more months and the electricity bill subsidy until December, in an attempt to mitigate the impact of high energy prices. The cabinet also approved an extension of the elimination of excise tax on diesel and bunker oil used to generate electricity. The move will mitigate the negative impact on domestic consumption.

Jakarta Composite Index declined 1.92%. Bank Indonesia increased the policy rate by 50 bps to 4.25%, the largest hike since June 2018. The decision was a pre-emptive and front-loaded move to lower core inflation and inflation expectations, and to maintain exchange rate stability. The Ministry of Finance expects Indonesia’s energy subsidies and compensation to exceed the allocated budget of IDR 502 trillion this year but to lower to IDR 338 trillion assuming global oil prices ease to USD90 per barrel and IDR trades “at a better level”.

The Philippines PSE Index declined 12.80% on negative capital flow.  Moody’s Analytics slashed its 2022 gross domestic product (GDP) growth target for the Philippines to 6.8% from the original target of 7.2% as high interest rates and slower global growth challenge Asia-Pacific economies. The revised forecast is still within the 6.5 to 7.5% GDP growth target set by the Development Budget Coordination Committee.

Vietnam’s VN-Index declined 11.590%. Headline inflation declined to 2.89% YoY in August, driven by lower transportation prices with eating out services and travel demand putting pressure on core inflation. Moody’s upgraded Vietnam’s rating to Ba2 from Ba3, outlook changed to stable from positive. The upgrade to Ba2 reflects Vietnam’s growing economic strengths relative to peers, improved policy effectiveness and greater resilience to external macroeconomic shocks, and as the economy continuously benefits from supply chain reconfiguration, export diversification and continued inbound investment in manufacturing.

The contraction in economic activities continued to worry global investors. The potential demand disruption from slower growth has started to be manifested in weaker corporate earnings guidance. The Federal Reserve’s pronouncements of its stance on rates hikes have continued to affect investors’ sentiment and bring about trading volatility. We think, the market has already factored in a higher interest rate environment, somewhat.

The corrections in recent periods present opportunity, especially in Asia ex. Japan, in particular Chinese equities. The positive impacts of expansionary Chinese policies to support economic activities and improving Covid-19 situation in China would improve economic activities. However, some form of lockdowns continues to appear in places, and there remains uncertainty as to how the transition will be going forward. There is continuing concern about issues in China’s property market and its impact on the economy, although measures are being taken to address the issues affecting this sector. The on-going Russia-Ukraine conflict and its significant impact on energy, food and other commodities will continue to weigh on investor sentiments.

We are watchful of developments in the Russia-Ukraine conflict as well as policy directions in the major economies, in particular US and China, which will have major implications on the economies in general as well as on specific sectors.  US policy responses will face headwinds going into 2022. Tapering and rate hikes in 2022 will affect liquidity and increase cost of borrowing in the system. In Asia, the focus is on China’s policy measures to spur economic activities and revive growth in the property sector, and how that might be impacted by China’s responses to Covid-19 situation there. The geopolitical risk premium has heightened on Nancy Pelosi’s visit to Taiwan.

While we are more cautiously optimistic, there remains headwind for risk assets, including rising bond yields and interest rate hikes to contain inflation and the relatively high commodity prices (although these have come off to some extent), as well as the still relatively high valuations in the developed markets. The heightened geo-political issues between China and US, and the tension between US/Europe and Russia over Ukraine will keep risk premium elevated at times and result in markets volatility.

We continue to apply our strategy of focusing on identifying fundamentally healthy companies with low valuations, low leverage, high growth, robust management and a strong track record, and adherence to our investment philosophy of “Never Fully Invest at All Times” which has served us well over the years. We are also in the midst of developing a robust ESG investment framework to meet the increasingly socially-aware demands of investors, as well as other stakeholders.

We thank you once again for your continued faith in us, and hope to remain good stewards in our endeavour to protect and grow your capital.

Dr. Tan Chong-Koay was conferred the 2022 ASEAN Distinguished Entrepreneur Lifetime Achievement Award at the 2022 ASEAN Leadership and Partnership Forum which was officiated by the Prime Minister of Cambodia, H.E. Samdech Decho Hunsen at Hyatt Regency Hotel, Phnom Penh, Cambodia in September 2022.

The markets in ASEAN performed relatively better.  The best performing regional indices were Ho Chi Minh Stock Index (+6.15%), PSEi (+4.24%) and Stock Exchange of Thai Index (+3.96%) and while the laggards were China A-shares (-2.19%), Shanghai SE Composite (-1.57%) and Hang Seng Index (-1.00%) Regional currencies were weak against the USD. The best performing currencies were Indonesia Rupiah (-0.07 %) and Malaysia Ringgit (-0.58 %).

For the month of August 2022, the MSCI Far East ex-Japan Index declined 0.99%, compared to the MSCI World Index’s 4.33% decline.

Major indices in the US corrected on Federal Reserve’s hawkish stance, which reiterated its tight monetary policy to tackle soaring inflation. Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned -4.06%, -4.24% and -4.64% respectively. Risk assets resumed their declines in August. Despite strong gains in July, for the year to date, the three US indices still recorded losses of 13.29%, 17.02% and 24.47% respectively. US inflation, as measured by the consumer price index (CPI), increased by 8.5% YoY in July, down from 9.1% in June. However, it remains elevated. The US jobs market continues to be strong with non-farm payrolls growing by a larger-than-expected 528,000 in July.

The Stoxx Europe 600 Index declined 5.29%. In Europe, the energy crisis across the region intensified amid worries over supply and high costs. Russia said it would halt the Nord Stream 1 pipeline, which supplies natural gas to Germany, for three days from 31 August.  Inflation continued to rise in the eurozone with annual consumer price index (CPI) inflation expected to surpass the 8.03% recorded in June.

Hong Kong and H shares indices declined, with Hang Seng Index and Hang Seng China Enterprises Index dropping 1.00% and 0.30% respectively. China’s A shares index also declined 2.19%. The official manufacturing PMI was down from 50.2 in June to 49.0 July, dropping back to contractionary territory and lower than market expectations of 50.3. Consumer Price Index (CPI) rose by 2.7% YoY in July, lower than market expectations. CPI growth is expected to reach the target level of 3% in 3Q22 which provide room for authority to be more accommodative on monetary policy.

South Korea’s KOSPI Index strengthens to 0.84% amid weaker sentiment on risk aversion.  The Bank of Korea raised its base rate by 25bps to 2.5% as expected. During the media conference, the governor guided to modest but continued rate hikes going forward, putting inflation control as the top policy initiative. Retail sales in South Korea raised 9.7% YoY in July amid eased COVID-19 curbs and the growth in people’s outdoor activities. The combined sales of 25 major offline and online retailers came to 14.17 trillion won (US$10.48 billion) last month, compared with 12.9 trillion won a year earlier, according to the data compiled by the Ministry of Trade, Industry and Energy. It marked the fifth consecutive month of on-year growth.

Taiwan’s TWSE Index gained 0.64% on consolidation amidst weaker electronics demand outlook. July export orders fell 1.9% YoY, missing forecast and Bloomberg consensus. Export orders totaled USD54.26bil in July, down 7.8% MoM (9.1% seasonally adjusted) and 1.9% YoY, far below consensus forecast, on the absence of normal peak. All major categories declined, except electronics, on a larger-than-expected decline in global demand & inventory adjustments.

Singapore’s STI gained 0.31%. Singapore’s annual inflation rate rose to 7.0% in July from 6.7% in the prior month, matching market consensus. This was the fastest rise in consumer prices since June 2008. Food prices were up 6.1% YoY, the most since November 2008. Additional upward pressures also came from cost of clothing (6.6% vs 5.4% in July); housing (5.9% vs 5.5%),; healthcare (2.7% vs 1.9%); transport (19.0% vs 18.8%); recreation & culture (4.9% vs 3.5%); and education (2.2% vs 5.1%). Core consumer prices climbed 4.8% YoY, the most since November 2008, above estimates of 4.7%. On a monthly basis, consumer prices were up 0.2%, the least in 3 months, after a 1% gain in June. The government expects 2022 annual inflation to be between 4.5-5.5%, while core inflation to average between 2.5-3.5%.

Malaysia’s KLCI gained 1.33%.  Malaysia inflation accelerated for the fourth straight month to a 14-month high of 4.4% YoY in July (from +3.4% in June). This big jump in headline inflation largely reflected upward adjustments in prices of some essential food items (i.e. chicken, eggs, and cooking oil) and services, the lapse of low base effects in electricity tariffs, and costlier vehicle purchases after the sales tax exemption expired on 30 June 2022 as planned.

Thailand’s SET Index gained 3.97% on bargain hunting. Thailand household debt is at a record high, based on a survey by the University of the Thai Chamber of Commerce. Thai household debt on average stood at 501,711 baht this year, a 3.7% increase from last year. Debt per household was the highest since the center began its annual survey on Thai household debt 13 years ago. This will have negative impact on domestic consumption, though it will be mitigated by increased tourist spending.

Jakarta Composite Index gained 3.27%. Indonesia’s central bank unexpectedly raised borrowing costs for the first time since 2018. Bank Indonesia (BI) raised its seven-day reverse repurchase rate by 25 bps to 3.75%, a move predicted by only seven of 31 economists in a Bloomberg survey. The BI raised its forecasts for headline and core inflation this year and said it sees risks that average price gains could exceed the 2%-4% target not just this year but also in 2023.

The Philippines PSE Index gained 4.24%. The central bank of the Philippines raised its key overnight borrowing rate by another 50bps to 3.75% at its August meeting, the fourth rate hike this year, and in line with market expectations. The overnight deposit and lending facilities rates were also raised by 50 bps to 3.25% and 4.25%, respectively.

Vietnam’s VN-Index gained 6.15%. Vietnam’s industrial production rose by 11.2% YoY in July, the most since May 2021, after a downwardly revised 9.1% growth a month earlier. The latest figure also pointed to the ninth straight month of increases in industrial output, as the economy reopened further in the wake of COVID-19 disruptions. Output growth accelerated for most components, including manufacturing (12.8% vs 9.9% in June), electricity, gas supply (8.7% vs 5.5%), and waste treatment (9.2% vs 6.3%). In contrast, mining output fell 1.5%, reversing from a 5.1% growth in June. For the first seven months of the year, industrial production expanded 8.8% YoY.

The contraction in economic activities continued to worry global investors. The potential demand disruption from slower growth has started to be manifested in weaker corporate earnings guidance. The Federal Reserve’s pronouncements of its stance on rates hikes will affect investors’ sentiment and bring about trading volatility. Market has already factored in a higher interest rate environment, somewhat.

The corrections in recent periods present opportunity, especially in Asia ex. Japan, in particular Chinese equities. The positive impacts of expansionary Chinese policies to support economic activities and improving Covid-19 situation in China and moves to exit from the lockdowns in the affected cities would improve economic activities. However, some form of lockdowns continues to appear in places, and there remains uncertainty as to how the transition will be going forward. There is continuing concern about issues in China’s property market and its impact on the economy. The on-going Russia-Ukraine conflict and its significant impact on energy, food and other commodities will continue to weigh on investor sentiments.

We are watchful of developments in the Russia-Ukraine conflict as well as policy directions in the major economies, in particular US and China, which will have major implications on the economies in general as well as on specific sectors.  US policy responses will face headwinds going into 2022. Tapering and rate hikes in 2022 will affect liquidity and increase cost of borrowing in the system. In Asia, the focus is on China’s policy measures to spur economic activities, and how that might be impacted by China’s responses to Covid-19 situation there. The geopolitical risk premium has heightened on Nancy Pelosi’s visit to Taiwan.

While we are more cautiously optimistic, there remains headwind for risk assets, including rising bond yields and interest rate hikes to contain inflation and the relatively high commodity prices (although these have come off to some extent), as well as the still relatively high valuations in the developed markets. The heightened geo-political issues between China and US, and the tension between US/Europe and Russia over Ukraine will keep risk premium elevated at times and result in markets volatility.

We continue to apply our strategy of focusing on identifying fundamentally healthy companies with low valuations, low leverage, high growth, robust management and a strong track record, and adherence to our investment philosophy of “Never Fully Invest at All Times” which has served us well over the years. We are also in the midst of developing a robust ESG investment framework to meet the increasingly socially-aware demands of investors, as well as other stakeholders.

We thank you once again for your continued faith in us, and hope to remain good stewards in our endeavour to protect and grow your capital.

This advertisement is solely for information purposes. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. The information contained herein does not have any regard to the specific investment objectives, financial situation or particular needs of any person. Investors may wish to seek advice from a financial advisor before making any investment decision. Past performance is not indicative of future results. An investment is subject to investment risks, including the possible loss of the principal amount invested.

The best performing regional indices were S&P BSE Sensex Index (+8.58%), S&P/ ASX 200 Index (+5.74%) and KOSPI Index (+5.10%) while the laggards were China H-shares (-10.19%), Hong Kong (-7.79%) and China A-shares (-7.02%). Regional currencies’ performances against the USD were mixed. The best performing currencies were Singapore dollar (+0.64 %) and Indonesia Rupiah (+0.42 %).

For the month of July 2022, the MSCI Far East ex-Japan Index declined 3.45%, compared to the MSCI World Index’s 7.86% rise.

Major indices in the US made strong gains on resilient second quarter corporate earnings delivery: Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned +6.73%, +9.11% and +12.35% respectively. Despite the good gains in July, for the year to date, the three US indices still recorded losses of 9.61%, 13.34% and 20.80% respectively.  The Federal Reserve (Fed) made a second consecutive 0.75% rate rise which was in line with market expectations. Inflation factor continued to keep Fed hawkish. The better than expected second quarter corporate results, in general, kept the indices buoyant as investors drove risk assets higher after sharp corrections in previous month.

The Stoxx Europe 600 Index gained 7.64%. In Europe, high inflation pushed the Central Bank (ECB) to deliver its first interest rate hike in over a decade, taking the Eurozone out of negative rates. European recessionary risk was most apparent in currency markets where the euro briefly slipped below parity with the dollar before rallying slightly in response to the ECB’s move.

Hong Kong and H shares indices declined, with Hang Seng Index and Hang Seng China Enterprises Index dropping 7.79% and 10.19% respectively. China’s A shares index also declined 7.02%. The macro headwind continued to dampen investors’ interest in Chinese equities with China reporting a first half gross domestic product (GDP) growth rate of a mere 2.5%. Growing move by home purchasers to boycott mortgage payments on abandoned projects raised concerns for recovery of the property sector and its negative impact on economic activities. The index heavy technology sector also took some beating on news of Jack Ma giving up control for Ant Financial which was taken as having potentially negative earnings impact for Alibaba.

South Korea’s KOSPI Index gained 5.10% on bargain hunting. Bank of Korea (BOK) Governor increased the rates by an unprecedented 50bps to 2.25% to tackle inflation. BOK is expecting inflation to peak in 3Q or 4Q and further increases in rates in the rest of the year to be more moderate. Retail sales remained healthy as an increase in household interest burden does not necessarily lead to a contraction in consumption, as interest expenses account for only 2.3% of total household disposable income.

Taiwan’s TWSE Index gained 1.18% on consolidation amidst weaker electronics demand outlook. Taiwanese economy expanded 3.08% YoY in the second quarter, moderating from 3.14% in the previous quarter, the slowest growth in the last two years, amid resurgence in Covid-19 infections in the country and in China which caused disruptions to supply chains and impacted on exports. Consumer Confidence Index declined to 63.05 in July, the lowest since November 2009.

Singapore’s STI gained 3.52%. Singapore’s retail sales rose by 17.8% y.oy in May, the most since June 2021, accelerating from a 12.1% gain a month earlier. This was also the third straight month of growth in retail trade, lifted by a further recovery in consumption following a full reopening of the economy. Sales growth accelerated for food & alcohol (47.3% vs 38.4% in April), cosmetics, toiletries (19.5% vs 17.7%), wearing apparel (98.2% vs 46.8%), petrol services (45.8% vs 24.5%), recreational goods (35.2% vs 8.0%, others (24.1% vs 6.1%), and in department stores (73.1% vs 31.3%). On a monthly basis, retail sales gained 1.8% in May, accelerating from a marginally revised 1.1% rise in April.

Malaysia’s KLCI gained 3.32%.  Malaysia s economic growth is expected to remain strong in the second quarter of this year, driven by several economic indicators, among them, the increase in the country’s trade which surged 43.4% in June 2022, hitting a new high of RM270.4 bil. The labour market also saw improvement with the unemployment rate declining to 3.9% in May 2022 compared with 4.5% in the same month in 2021.

Thailand’s SET Index gained 0.52%. The headline inflation continued to climb in June, driven by food and energy costs, and a weak baht. Inflation surged to +7.7% from a year ago (vs. +7.1% in May), while rising by +0.9% from the previous month (vs. +1.4% in May). Core inflation (excluding raw food and energy) picked up +2.5% (vs. +2.3% in May), the fastest pace since Mar 2012, while rising by +0.2% on m.o.m basis (similar to May).

Jakarta Composite Index gained 0.57%. Foreign direct investment into Indonesia (excluding investment in banking and the oil and gas sectors) jumped 39.7% YoY to a fresh record high of IDR 163.2 tril (USD 10.89 bil) in the second quarter of 2022, the biggest rise in the past decade, and accelerating from a 31.8% growth in the previous period, amid efforts by the government to ease business and licensing rules as COVID-19 situations improved further.

The Philippines PSE Index gained 2.61%.  Fitch lowered its GDP growth forecast for the Philippines to 6.5% this year, from 6.9% previously, citing continued inflationary pressures due to high prices of food and other commodities. On 14th July, in an unscheduled move, the Philippines central bank (“BSP”) unexpectedly raised its key interest rate by 75 basis points, its highest hike ever, to 3.25%. The BSP said significant tightening was needed due to signs of sustained, broadening price pressures and left the door open for further tightening.

Vietnam’s VN-Index gained 0.73%. The S&P Global Vietnam Manufacturing PMI declined to 54.0 in June 2022 from a 13-month high of 54.7 in May. Still, the latest reading pointed to the ninth straight month of expansion in factory activity.

The contraction in economic activities continued to worry global investors. The potential demand disruption from slower growth has started to be manifested in weaker corporate earnings guidance. However, second quarter earnings announcements in the US brought optimism to risk assets. The index volatility remains elevated.

The corrections in recent periods present opportunity, especially in Asia ex. Japan, in particular Chinese equities. The positive impacts of expansionary Chinese policies to support economic activities and improving Covid-19 situation in China and moves to exit from the lockdowns in the affected cities would improve economic activities, although there remains some uncertainty as to how the transition will be going forward. There is also continuing concern about issues in China’s property market and its impact on the economy. The on-going Russia-Ukraine conflict event with its significant impact on energy, food and other commodities has increased risk premium significantly.

We are watchful of developments in the Russia-Ukraine conflict as well as policy directions in the major economies, in particular US and China, which will have major implications on the economies in general as well as on specific sectors.  US policy responses will face headwinds going into 2022. Tapering and rate hikes in 2022 will affect liquidity and increase cost of borrowing in the system. In Asia, the focus is on China’s policy measures to spur economic activities, and how that might be impacted by China’s responses to Covid-19 situation there. The geopolitical risk premium has heightened on Nancy Pelosi’s visit to Taiwan.

While we are more cautiously optimistic, there remains headwind for risk assets, including rising bond yields and interest rate hikes to contain inflation and the relatively high commodity prices (although these have come off to some extent), as well as the still relatively high valuations in the developed markets. The heightened geo-political issues between China and US, and the tension between US/Europe and Russia over Ukraine will keep risk premium elevated at times and result in markets volatility.

We continue to apply our strategy of focusing on identifying fundamentally healthy companies with low valuations, low leverage, high growth, robust management and a strong track record, and adherence to our investment philosophy of “Never Fully Invest at All Times” which has served us well over the years. We are also in the midst of developing a robust ESG investment framework to meet the increasingly socially-aware demands of investors, as well as other stakeholders.

We thank you once again for your continued faith in us, and hope to remain good stewards in our endeavour to protect and grow your capital.

This advertisement is solely for information purposes. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. The information contained herein does not have any regard to the specific investment objectives, financial situation or particular needs of any person. Investors may wish to seek advice from a financial advisor before making any investment decision. Past performance is not indicative of future results. An investment is subject to investment risks, including the possible loss of the principal amount invested.