IMPORTANT: PHYSICAL FORMS TO REACH PHEIM UNIT TRUSTS BERHAD OFFICE LATEST ON THE RESPECTIVE LAST DAY OF SUBMISSION, PLEASE PLAN AHEAD IF SUBMITTING THROUGH PLATFORMS/DISTRIBUTION CHANNELS.

IMPORTANT: PHYSICAL FORMS TO REACH PHEIM UNIT TRUSTS BERHAD OFFICE LATEST ON THE RESPECTIVE LAST DAY OF SUBMISSION, PLEASE PLAN AHEAD IF SUBMITTING THROUGH PLATFORMS/DISTRIBUTION CHANNELS.

Risk assets staged a strong comeback in November 2023 on optimism over interest rate outlook, with the markets in Far East ex-Japan, as a whole, lagging the developed markets.  The MSCI Far East ex-Japan Index gained 6.93%, while the MSCI World Index advanced 9.21%. Among the Far East ex-Japan markets, Korea and Taiwan performed particularly well, while Chinese equities were downbeat. The ASEAN Index gained 3.87%, without significant flow through of risk on sentiments seen in the developed markets. Markets that performed well were Korea (+11.30% in local term), Taiwan (+8.95%) and Vietnam shares (+6.41%), while the laggards were Chinese H shares (-0.41%), Hong Kong shares (-0.07%) and China A shares (-2.41%), Thailand shares (-0.12%). Regional currencies were mostly stronger against the USD. The best performing currencies were Korean Won (+4.70%) and Taiwan NT (+3.61%), while the laggards were Vietnamese Dong (+1.25%) and Malaysia Ringgit (+2.19%).

Major US indices advance strongly after a few months of weakness.  The market rebounded on optimism over interest rate outlook as headline and core inflation continued to soften. Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned +8.77%, +8.92% and +10.70% respectively. The market was particularly encouraged by the release of the US Consumer Price Index (CPI) reading for October, which was cooler than expected. Headline and core inflation dropped to 3.2% YoY (September: 3.7%) and 4.0% YoY (September: 4.1%) respectively. The biggest driver of the decline was a fall in energy and gasoline prices, followed by lower travel costs and hotel rates. Despite the ongoing conflict in the Middle East, the price of a barrel of Brent crude oil fell to US$80, in part thanks to an increase in US supply and OPEC+ members’ failure to adhere to production quotas.

The Stoxx Europe 600 Index gained 6.45% amidst risk on sentiment. In Europe, Eurostat’s flash CPI release for November showed headline and core inflation slowing to 2.4% YoY and 3.6% YoY respectively. Lower energy prices were the major contributor to the fall, but within the core print both goods and services inflation also eased. European industrial production and manufacturing activity remained depressed, mainly due to poor data from Germany and France. However, eurozone Q3 employment growth was robust, rising 0.3% quarter on quarter (QoQ).

Hong Kong and H shares indices underperformed on continued foreign fund outflows. Hang Seng Index declined 0.41%, while Hang Seng China Enterprises Index gained marginally 0.12% on soft economic activities. China’s A shares index gained 0.35%. China’s manufacturing activity unexpectedly shrank in October. The Caixin manufacturing purchasing managers’ index fell to 49.5 from 50.6 in September, missing economists’ forecast of 50.8. The disappointing numbers underlined the fragility of the economic recovery and fueled calls for more policy support.

South Korea’s KOSPI Index surged 11.30%, reflecting buoyant sentiment on risk asset and optimism on export growth outlook. Industrial Research Institute foresees Korea’s export growth of 5.6% next year, hitting a US$26.5bn surplus, led by semiconductors and autos. GDP growth for 2024 is projected at 2.0%, better than the 1.4% projected for 2023. However, inflation, high-interest rate and weakened consumer spending remain as concerns.

Taiwan’s TWSE Index chalked up a strong 8.95% gain on global technology index strength. Taiwan’s exports resumed weakness in October, declining 4.5% YoY. The Consumer price index rose 3.05% YoY in October, faster than the 2.93% growth recorded in the previous month, according to data released by the Directorate General of Budget, Accounting & Statistics. There is strong optimism that Taiwan’s GDP will rebound in 2024 to reach a growth rate of 3.15%, according to the Taiwanese Institute of Economic Research (TIER).

Singapore’s STI gained 0.17%. Singapore’s NODX shrank by 3.4% YoY in October, better than forecasts of a 6.5% drop after a 13.2% fall in September. It was the 13th consecutive month of contraction, but the softest reduction in the sequence, due to a softer drop in electronic and non-electronic products. On a seasonally adjusted basis, NODX grew 3.4% in October, following an 11.1% jump in September, above forecasts of a 1.5% growth.

Malaysia’s KLCI gained 0.74%.  Economic activities remained benign. The manufacturing industry in Malaysia operated at 79.4% capacity utilization in the third quarter (Q3), declining by 1.9% YoY as compared to 81.3% a year ago, official data showed. The lower capacity utilization rate recorded in Q3 was in line with the production of manufacturing output, indicated by the marginal decline of 0.1% in the industrial production index.

Thailand’s SET Index declined 0.12%. The consumer confidence index increased for the third month in a row to 60.2 in October 2023, up from 58.7 the previous month. The reading was the highest since February 2020, attributable mostly to government stimulus initiatives, increased international visitor arrivals, and stronger exports. The tourist industry has continued to contribute to the economy, with the government projecting at least 26 to 27 million foreign visitors in 2023.

Jakarta Composite Index gained 4.87%. The Consumer Confidence Index (CCI) rebounded to 124.3 in October from 121.7 in September. The increase in CCI was mainly driven by the lower-income groups (those with less than IDR3.1million monthly income), which saw an increase to 113 from 109 in September, likely helped by acceleration in government spending, including social spending. Meanwhile, the high-income segment registered a modest improvement to 134.7 from 133.7.

The Philippines PSE Index gained 4.18%. The Philippine GDP growth accelerated to 5.9% YoY in the third quarter, up from a 4.3% growth in the previous period and beating market forecasts of a 4.7% rise. The annual inflation rate also eased to a three-month low of 4.9% in October 2023 from 6.1% in September and below market forecasts of 5.6%.

Vietnam’s VN-Index gained 6.41% on bargain hunting from retail investors. Industrial production (IIP) increased 5.8% YoY in November, the highest level in nine months, lifting IIP growth in 11M 2023 to 1.0% YoY. Trade data remains healthy with exports and imports posting positive growth for the third consecutive month. Exports grew 6.7% YoY and imports grew 5.1% YoY. In 11M 2023, exports and imports still declined 5.9% YoY and 10.7% YoY to USD322.5bn and USD296.7bn, respectively, resulting in a trade surplus of USD25.8bn (vs USD10.3bn in 11M 2022).

After many months of rate hikes by the US Fed to beat inflations,  the easing of inflation rate in recent months has raised market expectations that that rates may start to fall, although the Fed has yet to change its “higher for longer” interest rate guidance.   US economic and inflation data, and expectation on, and Fed’s rate decisions, will continue to have a major influence on investors’ investment decisions on risk assets. Meanwhile, investors are pricing in lower interest rate environment as early as second half of 2024. This has kept investment sentiment buoyant.

We remain watchful of geo-political developments as well as policy directions in the major economies, in particular US and China.  The new geo-political risk arising from the Israel-Hamas conflict, and the risk that it may potentially spread in the Middle East has added to the uncertainties. US economic and inflation data and interest rate policy responses will affect market sentiments and liquidity. In Asia, the focus is on the pace of China’s economic recovery which has been weaker than expected.  The Chinese property sector continues to face severe challenges, and any sign of stabilization will have positive catalyst for the economy and risk assets.  The Chinese government has announced various support measures to help the economy, and the market expectation is that more will be required.

While we are cautiously optimistic, there remains headwind for risk assets, including continuation of high interest rate and its impact on economic activities, and slower than expected economic growth in China, as well as the still relatively high valuations in the developed markets. The continuing geo-political tension in Europe and in East Asia, and the new conflict in the Middle East will keep risk premium elevated at times and result in markets volatility.   We will be watchful on these.

The market corrections in Chinese equities and their depressed valuation may offer potential upside on expansionary Chinese policies to support economic activities.

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 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 article 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.

Pheim Asset Management Sdn Bhd, Pheim Islamic Asset Management Sdn Bhd and Pheim Unit Trusts Berhad (collectively known as “Pheim”) have been made aware on 29 November 2023 of a suspected scam, actively viral through several social media platforms, including but not limited to Facebook and Instagram, impersonating as Pheim’s Founder/ Executive Chairman/ Chief Strategist – Dr Tan Chong Koay.

The suspected scammer used an unauthorised picture, full name of our Dr Tan Chong Koay and an unknown contact number, which does not belong to any Pheim’s representative, to send unsolicited messages from this unknown number, disguising members of the public on some fictitious events (e.g. 2023 Malaysia Financial Summit, online teaching, etc.) allegedly organized by Pheim or Dr Tan Chong Koay. Pheim have reported this suspected scam to the Police and the relevant Authorities.

Pheim warn the public that it does not have any affiliation or connection with these fictitious events and advise the public to be cautious of individuals or organizations claiming or promising dazzling returns or offering exclusive deals with exorbitant profits overnight.  Members of the public are advised to exercise caution when approached by unsolicited investment offers, especially those urging urgency or requesting for personal information or upfront payments.

Markets worldwide remained in the correction mode in October 2023, with the markets in Far East ex-Japan overall faring worse than the developed markets. The MSCI Far East ex-Japan Index declined 4.09%, while the MSCI World Index fell 2.97%. The Far East ex-Japan markets declined across the board. The ASEAN Index declined 4.40%. Markets that performed relatively better were Malaysia (1.26% in local term), Taiwan (-2.16%) and China A shares (-3.17%), while the laggards were Vietnam shares (-10.91%), Korea shares (-7.59%) and Philippines shares (-5.50%). Regional currencies were mostly weak against the USD. The best performing currencies were Thai Baht (+1.15%) and Korean Won (-0.20%), while the laggards were Indonesia Rupiah (-2.67%) and Malaysia Ringgit (-1.46%).

Major US indices continued to ease after a few months of strength.  The market retreated on profit taking and heightened geopolitical uncertainty surrounding the Israel-Hamas conflict. Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned -1.36%, -2.20% and -2.78% respectively. The headline Consumer Price Index (CPI) remained stable in September at 3.7% YoY. The US economy grew 4.9% on an annualized basis in the third quarter while jobs report and retails sales data continued to suggest resilient economic activities. The strength of the economy was supported by buoyant consumer spending, which accelerated at a 4.0% rate after rising only 0.8% pace in the second quarter. It added to 2.69% points to GDP growth.

The Stoxx Europe 600 Index declined 3.68% following US indices correction. Bank surveys from the European Central Bank (ECB) showed a contraction in the supply of credit to households and businesses in the third quarter, while the eurozone composite purchasing managers’ index (PMI) fell 0.7 points to a preliminary 46.5 in October.

Hong Kong and H shares indices declined despite reporting strong third quarter Gross Domestic Product (GPD) figure. Hang Seng Index and Hang Seng China Enterprises Index declined 3.91% and 4.66% respectively on general weak sentiment over risk assets and lower than expected Golden Week consumption figures for China. China’s A shares index also declined 3.17%. The Chinese government announced more pump priming polices over the month. The government approved issuing additional Rmb 1 trillion sovereign bonds to support disaster relief and construction projects. Gross domestic product for the three months ended September expanded 4.9% YoY and 1.3% QoQ from the previous quarter, far exceeding economists’ expectations as government stimulus efforts appeared to take root.

South Korea’s KOSPI Index declined 7.59%, reflecting risk aversion on risk assets. Bank of Korea (BoK) kept the key rate unchanged for 6 consecutive sessions amid global risks and uncertainties. The CPI inflation ratcheted up to 3.7% in September, accelerating for a second month after six consecutive months of cooling.

Taiwan’s TWSE Index declined 2.16%. Taiwan’s exports unexpectedly grew in September for the first time in more than a year, adding to signs that global trade is recovering. Overseas shipments rose 3.4% YoY to US$38.8 billion last month, according to a statement from the Finance Ministry. That was better than the median estimate for a 2.5% decline in a Bloomberg survey of economists.

Singapore’s STI declined 4.65%. Singapore’s GDP grew by 0.7% YoY in 3Q23, exceeding market forecasts of 0.4% and after a 0.5% advance in 2Q, flash data showed, amid growing signs that the city-state’s recovery is gaining traction. The service sector continued to rise (1.9% vs 2.8% in 2Q). On a quarterly basis, the economy expanded 1.0% in 3Q, sharply accelerating from a downwardly revised 0.1% rise in 2Q and marking the second successive quarter of increase.

Malaysia’s KLCI increase 1.26%, holding up relatively well.  Malaysia’s economy expanded 3.3% in 3Q from year earlier, accelerating from 2.9% in the three months ended June. However, the Ringgit plummeted to its lowest level in 25 years against the USD, dropping by 0.3% to 4.7635 per Dollar, marking its weakest performance since the 1997 Asian Financial Crisis.

Thailand’s SET Index declined 6.09%. Thailand’s exports surprisingly climbed 2.1% YoY to US$ 25.48 billion in September 2023, exceeding market expectations of a 1.75% decline and maintaining the momentum from the 2.6% growth the previous month even though global demand was weak. It was the second month of continuous growth aided by increased shipments of agricultural and forward rate agreement products amid a weakening economy. Exports fell 3.8% in the nine months of the year compared to the same period in 2022.

Jakarta Composite Index declined 2.70%. The Consumer Confidence Index (CCI) dropped sharply to 121.7 in September, down from 125.2 in August. The decline was primarily driven by the lower-income segments (i.e., those with a monthly income below IDR3.1 million), which experienced a more pronounced fall to 109 from 117 in August. In contrast, the upper-income segments (i.e., those with incomes above IDR5 million) saw a slight increase in confidence.

The Philippines PSE Index declined 5.50%. The annual inflation rate rose for the second month to 6.1% in September 2023, well above August’s and market expectations of 5.3%, and was the highest reading since May. The S&P Manufacturing PMI also rose in September to 50.6 from 49.7 in August, indicating a renewed expansion across the manufacturing sector at the end of the third quarter.

Vietnam’s VN-Index declined 10.91% on heavy profit taking from retail investors. There were market talks of potential interest rate hike on the back of weakness in currency. The risk that the State Bank of Vietnam may have to tighten its monetary policies resulted in weak market sentiment especially in the retail dominated Vietnam market.

The string of rate hikes since 2022, the duration of high interest rate environment and their impact on economic growth, in particular how severe the global economic recession will be, if any, will remain the focus of investors’ concern. The new geo-political risk arising from the recent Israel-Hamas conflict, and the risk that it may potentially spread in the Middle East has added to the uncertainties.  The easing of inflation rate in recent months and resilient employment and consumption data have raised expectation of a soft landing for the US economy, although a recession can still not be ruled out. US economic and inflation data, and expectation on, and Fed’s rate decisions, will continue to have a major influence on investors’ investment decisions on risk assets. Meanwhile, investors are also having to contend with the implication of US 10-year government bond yield rising to historical highs and its ramification on US government finance and business costs, as well as on the US equity and bond markets.

The market corrections in recent periods would present opportunities, in particular in Chinese equities on depressed valuation and which may offer potential upside on expansionary Chinese policies to support economic activities.

We remain watchful of geo-political developments as well as policy directions in the major economies, in particular US and China.  US economic and inflation data and interest rate policy responses will affect market sentiments and liquidity. In Asia, the focus is on the pace of China’s economic recovery which has been weaker than expected.  The Chinese property sector continues to face severe challenges, and any sign of stabilization will have positive catalyst for the economy and risk assets.  The Chinese government has made known its intention to take counter-cyclical policy measures to maintain a healthy economic environment.

While we are cautiously optimistic, there remains headwind for risk assets, including continuation of high interest rate and its impact on economic activities, and slower than expected economic growth in China, as well as the still relatively high valuations in the developed markets. The continuing geo-political tension in Europe and in East Asia, and the new conflict in the Middle East will keep risk premium elevated at times and result in markets volatility. We will be watchful on these.

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 increased expectations of investors and 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 article 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.

Markets continued to trend lower in September 2023, with the markets in Far East ex-Japan overall faring better than the developed markets.  The MSCI Far East ex-Japan Index declined 3.82%, while the MSCI World Index fell 4.45%. The Far East ex-Japan markets declined due to weaker than expected economic activities in China and foreign fund outflows. The ASEAN Index performed slightly better, declining 3.68%. Markets that performed relatively better were Philippines (+2.36% in local term), Singapore (-0.49%) and Indonesia shares (-0.19%), while the laggards were Thailand shares (-6.04%), Vietnam shares (-5.71%) and Korea shares (-3.57%). Regional currencies were mostly weak against the USD. The best performing currencies were Philippines Peso (+0.04%) and Chinese Yuan (-0.54%), while the laggards were Thai Baht (-4.25%) and Korean Won (-1.87%).

Major US indices eased after a few months of strength.  During the month, Fed increased interest rate by 25 bps in line with market expectation. The market retreated on profit taking and allocation shift to safer assets class on strong treasury yields. The threat of federal government shutdown added to negative market sentiment. Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned -3.50%, -4.87% and -5.81% respectively. The headline Consumer Price Index (CPI) increased slightly in August to 3.7% YoY due to higher food and energy prices, while core CPI decelerated to 3.9%, below July’s 4.0% YoY, the first time in two years.

The Stoxx Europe 600 Index declined 1.74% following US indices correction. Business surveys remained subdued in September, with the Composite PMIs for the Euro area still in “contraction” territory, registering 47.1. Eurozone inflation slowed by more than anticipated in September: the headline rate fell to 4.3%, while core inflation eased to 4.5%. The ECB raised its deposit rate by 25bps, to 4%.

Hong Kong and H shares indices declined on continued foreign fund outflows. Hang Seng Index and Hang Seng China Enterprises Index declined 3.11% and 2.91% respectively on concerns over weaker than expected economic activities. China’s A shares index also declined 2.01%. Despite incremental initiatives and policies to help boast economic activities and confidence, they were insufficient to excite investors. PBOC announced a slew of measures to support property market and ease financial burden on homeowners. China is witnessing the biggest flight of capital in years, creating concern for authorities as it worsens pressure on the beleaguered yuan which plumbed a 16-year low, spurred by a widening interest-rate gap . Of the US$49 billion [comment-I assume the nos are in US$] outflow from the capital and financial account last month, US$29 billion came from securities investments, according to data from the State Administration of Foreign Exchange.

South Korea’s KOSPI Index declined 3.57% reflecting risk aversion on risk assets. The size of local major bank’s household loans that have potential risk of default has increased to approximately W2.4 trillion as at August 2023, rising +34% compared to June 2022 amid continuously rising yield.  The surge in household bank debt at risk of default does not bode well for domestic consumption. On the positive side, South Korea’s trade data indicated the trend of declining exports moderated further in the first part of September, raising hopes for a return to growth later this year. Daily shipments decreased 7.9% on average in the first 20 days of the month compared with a year earlier according to the customs office. That’s a smaller drop than the 8.3% decline for the full month of August.

Taiwan’s TWSE Index declined 1.69%. The movement of the technology heavy Taiwan index reflected the sharp correction in global technology stocks. Taiwan export orders totaled US$46.04bn in August, down 3.5% MoM (down 1.8% seasonally adjusted) and 15.7% YoY. The decline widened from last month’s 12% drop, and was worse than economist forecast of an 11% YoY decline and consensus of an 11.4% YoY decline.

Singapore’s STI declined 0.49%. The annual inflation rate in Singapore further slowed to 4% in August 2023 from 4.1% in the previous month, in line with market expectations. This marked the lowest rate since January 2022. Meanwhile, the annual core inflation rate eased to 3.4%, marking the softest rise since April 2022.

Malaysia’s KLCI declined 1.91%.  Malaysia’s economy will grow at a slower pace in 2023 according to the government official cited slowing global growth and rising commodity and food prices. Malaysia had earlier forecast its economy would grow 5.3% to 6.3% this year, with the central bank saying last month that it could be in the upper end of the range.

Thailand’s SET Index declined 6.04%, the worst performer in the region, on risk aversion as there were market concerns on disagreement on policies direction between the Prime Minister and the finance minister. The central bank raised its policy rate by 0.25% to 2.50%. Thailand’s latest trade balance moved to a small surplus of US$ 0.36 billion compared to US$ 1.98 billion deficit in July reflecting a potential slowdown in external demand. For the first time in eleven months, shipments increased by 2.6% YoY to US$ 24.28 billion, beating the previous forecast of a 4% fall.

Jakarta Composite Index declined 0.19%. Indonesia’s exports shrank 21.21% from a year earlier to US$ 22 billion in August 2023, compared with market forecasts of a 22% fall, following a marginally revised 18.10% drop in July. It was the third straight month of decline in exports and the steepest fall since April, amid moderating commodity prices. For the first eight months of 2023, shipments shrank by 11.85% YoY. In 2022, Indonesian exports surged 26.07%. President Joko Widodo officially launched the carbon trading market in the country as a commitment toward reduction in GHG and net zero emission target in 2060.

The Philippines PSE Index stood out with a gain of 2.36%. The government budget deficit surged by 85% to PHP 133 billion in August 2023 from PHP 72 billion in the corresponding month of the previous year. Government revenues fell by 6.58% to PHP 310.6 billion due to a decline in tax and non-tax receipts by 5.82% and 17.05%, respectively. Meanwhile, expenditures increased 9.66% from a year earlier to PHP 443.6 billion. For the January-August period, the country’s budget deficit declined by 12% yoy to PHP 732.5 billion, compared to PHP 833 billion in the same period last year.

Vietnam’s VN-Index declined 5.71% on profit taking. Vietnam and the US took a significant step forward by upgrading their relationship to a Comprehensive Strategic Partnership (CSP). This is the highest level of diplomatic ties within Vietnam’s three-tier hierarchy. In a joint statement, the two nations explained that they are committed to enhancing cooperation in several areas, including economic, trade and investment cooperation. The CSP will enhance bilateral trade between Vietnam and the US, particularly boosting exports to the US.

The string of rate hikes since 2021, the duration of high interest rate environment and their impact on economic growth, in particular how severe the global economic recession will be, if any, will remain the focus of investors’ concern. In the near term, investors will refocus on  upcoming third quarter US corporate earnings announcement. The easing of inflation rate in recent months and resilient employment and consumption data have raised expectation of a soft landing for the US economy, although a recession can still not be ruled out. Geo-political developments will remain on investors’ radar screen. US economic and inflation data, and expectation on, and Fed’s rate decisions, will continue to have a major influence on investors’ investment decisions on risk assets. Meanwhile, investors are also having to contend with the implication of US 10-year government bond yield rising to historical highs and its ramification on US government finance and business costs, as well as on the US equity and bond markets.

The market corrections in recent periods would present opportunities, in particular in Chinese equities on depressed valuation and which may offer potential upside on expansionary Chinese policies to support economic activities.

We remain watchful of geo-political developments as well as policy directions in the major economies, in particular US and China.  US economic and inflation data and policy responses in terms of rate hikes in 2023 will affect market sentiments and liquidity, not just in the US but world wide. The market seems to have factored in a peak in interest rates in 2023, though risk remains. In Asia, the focus is on the pace of China’s economic recovery. China’s economic data post-Covid have been weaker than expected.  The Chinese property sector continues to face severe challenges, and any sign of stabilization will have positive catalyst for the economy and risk assets.  The Chinese government has made known its intention to take counter-cyclical policy measures to maintain a healthy economic environment.

While we are cautiously optimistic, there remains headwind for risk assets, including high interest rate and slower economic activities in 2023, particularly in China, as well as the still relatively high valuations in the developed markets. The continuing geo-political tension in Europe and in East Asia will keep risk premium elevated at times and result in markets volatility.  We will be watchful on these.

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 increased expectations of investors and 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 article 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.

For the month of August 2023, markets were generally down, with the developed markets faring better than the markets in Far East ex-Japan.  The MSCI Far East ex-Japan Index declined 7.50%, while the MSCI World Index had a smaller 2.55% fall. The Far East ex-Japan markets declined from the previous month’s strong gain on the back of weaker than expected economic activities in China, as well as down beat economic data in Korea. The ASEAN Index performed better, declining 3.97%. Markets that performed relatively better were Indonesia (0.32% in local term), Vietnam (+0.09%) and Thailand shares (+0.63%), while the laggards were Philippines shares (-6.31%), Hong Kong shares (-8.45%) and China H shares (-8.22%). Regional currencies were weak against the USD. The best performing currencies were Indonesia Rupiah (-0.98%) and Taiwan NT (-1.33%), while the laggards were Korean Won (-3.67%) and Philippines Peso (-3.01%).

Major US indices consolidated after a few months of strength. The market retreated on profit taking and downgrading of the US government’s credit rating by Fitch. However, the resilient economy activities data kept sentiment buoyant. Labour market data pointed to a cooling but still strong jobs market in July, with payroll job gains of 187,000, slightly below consensus expectations for 200,000. Unemployment ticked down to 3.5%, while average hourly earnings were slightly stronger than expected at 4.4% YoY. Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned -2.36%, -1.77% and -2.17% respectively. The headline Consumer Price Index (CPI) increased slightly in July to 3.2% YoY due to higher food and energy prices, while core CPI decelerated slightly to 4.7% YoY from 4.8% YoY in June.

The Stoxx Europe 600 Index declined -2.79% following US indices correction.  Eurostat’s flash GDP estimate showed that euro area GDP grew by 0.3% QoQ in Q2 2023. While this pace was relatively modest, euro area labour markets remain very tight, with the unemployment rate dropping to 6.4% in June, its lowest level on record. However, the economic outlook remains uncertain, as the August composite PMI fell to 47, its lowest level (ex-Covid) since 2012. Eurozone headline inflation defied expectations and remained flat in August at 5.3% YoY. Core inflation, however, did fall modestly from 5.5% YoY in July to 5.3% YoY in August.

Hong Kong and H shares indices declined on profit taking with increase in trading volatility. Hang Seng Index and Hang Seng China Enterprises Index declined -8.45% and -8.22% respectively on concerns over slowing economic activities. China’s manufacturing activity contracted for the fifth consecutive month in August. The official manufacturing purchasing managers’ index rose slightly to 49.7 last month, signaling contraction in manufacturing but still an improvement over the 49.3 reading in July. China’s A shares index also declined 7.71%, compared to the previous month’s gain. The weakness in the property sector continues to worry investors as Country Garden Holdings Company Ltd’s stock and bonds plunged, as scrutiny intensified over its operations and ability to meet debt payments. The ripple effect on domestic consumption due to negative wealth effect will further dampen the economy growth outlook.

South Korea’s KOSPI Index declined 6.48% reflecting risk aversion on risk assets. Bank of Korea froze its key rate for another month. South Korea’s factory output fell again in July, continuing its longest stretch of declines in decades as it struggles with exports amid a global slowdown. Industrial production dropped 8% YoY in July, resulting in a 10th consecutive month of decline, according to data released by Statistics Korea. That’s worse than the 6% decrease forecast by economists.

Taiwan’s TWSE Index declined -2.98%.  Consumer confidence in Taiwan’s economy experienced a decline in August, reversing a three-month upward trend, according to a survey released by National Central University (NCU). The Consumer Confidence Index (CCI) dropped 0.88 points from the previous month to 67.51. On the positive note, Taiwan export orders totaled US$47.73bn in July, up 8.0% MoM, but down 12.0% YoY. The decline is much narrower than last month’s 24.9% contraction, and far better than consensus of 15.5% YoY decline.

Singapore’s STI declined -4.17%. Singapore Manufacturing PMI rose slightly to 49.8 in July from June’s 49.7, marking the fifth consecutive month of contraction but indicating stabilization in factory activity. Moderate declines were observed in new orders, new exports, factory output, and employment indices, while inventory reduction accelerated. Simultaneously, the electronics sector, comprising 42% of Singapore’s industrial output, improved to 49.3 (from June’s 49), ending 11 months of decline, due to rising demand for enhanced AI integration capacity. Import prices in Singapore continued falling for the seventh month, reaching -7.5% YoY in July, while export prices improved to -12.1% YoY, up from June’s -15.1%.

Malaysia’s KLCI declined -0.51%. The headline inflation in July eased to 2.0% , against 2.4% in June. Malaysia’s producer price index (PPI) indicated further moderation in overall inflationary pressure. The PPI has deflated for the sixth consecutive month in July 2023, declining by 2.3% YoY, while manufacturing input prices deflated by 2.1% YoY, the steepest in three-month.

Thailand’s SET Index increase +0.09%, which is a relatively better performance among regional markets on the back of positive political development. However, the S&P Global Thailand Manufacturing PMI dropped to 48.9 in August 2023 from July’s 50.7, signaling the first factory activity decline in 19 months. This was led by a notable drop in new orders. Concurrently, output growth hit a nearly 2-year low, while purchasing activity increased slower, reflecting concerns about order expansion.

Jakarta Composite Index increased +0.32%. Indonesia’s annual inflation rate increased to 3.27% in August 2023 from a 16-month low of 3.08% in the previous month. The inflation rate remained within the central bank’s target of 2-4% for a fourth consecutive month. Core inflation slowed to an 18-month low of 2.18% in August. Exports remained weak amid the slowing global economy. Indonesia export dropped 18.03% from a year earlier to USD 20.88 billion in July 2023, after having plunged 21.18% in June. For the first seven months of 2023, shipments dropped by 10.27% from the same period last year.

The Philippines PSE Index declined -6.31%. The central bank of the Philippines held its benchmark interest rate for the third straight meeting at 6.25% in August 2023, confirming market expectations. The country’s headline inflation slowed to a 16-month low of 4.7% in July, still outside but nearing policymakers’ target range of 2%-4%.

Vietnam’s VN-Index increased +0.09%. Vietnam’s central bank continued to embark on expansionary monetary policy to spur economic activities. The central bank will suspend some lending regulations to help the country’s ailing property market after Prime Minister Pham Minh Chinh ordered the regulator to help businesses obtain better access to loans. The State Bank eased three property lending clauses starting in September, making it easier for developers and home buyers to get loans.

The string of rate hikes since 2021 and their impact on economic growth, in particular how severe the global economic recession will be if any, will remain the focus of investors’ concern. In the near term, investors will refocus on  upcoming third quarter US corporate earnings announcement. The resilient employment and consumption data have raised expectation of a soft landing for the US economy, although a recession can still not be ruled out. Geo-political developments will remain on investors’ radar screen. US economic data and interest rate trend and expectation on the Fed’s rate decisions will continue to have a major influence on investors’ investment decisions on risk assets. The easing of inflation rate in recent months has lifted investors’ sentiment, in particular in US risk assets. The US headline consumer price index (CPI) of 3.2% in July was in line with market expectation.

The market corrections in recent periods would present opportunities, in particular in Chinese equities on depressed valuation and which may offer potential upside on expansionary Chinese policies to support economic activities.

We remain watchful of geo-political developments as well as policy directions in the major economies, in particular US and China.  US economic and inflation data and policy responses in terms of rate hikes in 2023 will affect market sentiments and liquidity, not just in the US but worldwide. The market seems to have factored in a peak in interest rates in 2023, though risk remains. In Asia, the focus is on the extent of China’s economic recovery following the end of its “zero Covid” policy. China’s economic data post-Covid have been weaker than expected.  The Chinese property sector recovery remains weak, and any sign of stabilization will have positive catalyst for the economy and risk assets.  The Chinese government has made known its intention to take counter-cyclical policy measures to maintain a healthy economic environment.

While we are cautiously optimistic, there remains headwind for risk assets, including high interest rate and slower economic activities in 2023, particularly in China, as well as the still relatively high valuations in the developed markets. The continuing geo-political tension in Europe and in East Asia can have major implications for businesses and economic activities, and will keep risk premium elevated at times and result in markets volatility. We will be watchful on these.

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 increased expectations of investors and 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 article 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.

Free Malaysia Today has published an article featuring  Dr Tan Chong Koay and Pheim titled :

“External fund managers pivotal in EPF’s quest for higher returns”

Please feel free to read up on our founder’s article at:

https://www.freemalaysiatoday.com/category/nation/2023/08/25/external-fund-managers-pivotal-in-epfs-quest-for-higher-returns/ 

For the month of July 2023, the MSCI Far East ex-Japan Index gained 6.24%, compared to the MSCI World Index’s 3.29% gain. The performance of the Far East ex-Japan markets gained momentum from the previous month’s gain on the back of a stronger recovery in Chinese risk assets which had squeezed short positions. The ASEAN Index performed in line, gaining 6.34%. Markets that performed relatively better were Vietnam (+9.17% in local currency term), China H shares (+7.38%) and Malaysia (+6.01%), while the laggards were Taiwan shares (+1.36%), Philippines shares (+1.91%) and Korea shares (+2.66%). Performances of regional currencies was mixed against the USD. The best performing currencies were Malaysia Ringgit (+3.55%) and Korean Won (+3.41%), while the laggards were Taiwan NT (-0.96%) and Vietnam Dong (-0.45%).

Major US indices continued to rise, though the pace softened.  The market performed well on resilient economy activities data and improved expectation of a soft landing of the US economy, instead of a second half recessionary economy. The general buoyant second quarter result announcements helped to improve investors sentiment. Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned +3.35%, +3.11% and +4.05% respectively. The headline inflation fell more than expected to 3% YoY (from 4% previously), although core inflation remained stickier at 4.8% YoY. The Federal Reserve (the Fed) raised its key policy rate by 25 basis points (bps) to take the Fed funds rate to 5.25%-5.50%, in line with market expectations.

The Stoxx Europe 600 Index gained 2.04%.  The European Central Bank (ECB) also raised rates in July, increasing the deposit rate 25bps to 3.75% in line with its earlier guidance. The ECB’s stance on policy outlook was more dovish due to falling eurozone inflation and weaker activity data leading up to its July meeting. The eurozone composite purchasing managers’ index (PMI) fell to a preliminary 48.9 in July, suggesting modest economic contraction over the month. The manufacturing PMI dropped yet further to a post-Covid low of 42.7.

Hong Kong and H shares indices gained on bargain hunting, however trading volatility remained elevated. Hang Seng Index and Hang Seng China Enterprises Index gained 6.15% and 7.38% respectively on pro-growth policies announcement by Chinese authority. China’s A shares index also gained 6.11%, compared to the previous month’s loss. During the Politburo meeting, the Chinese government acknowledged challenges faced by the economy and called for counter-cyclical policies. It is the first time the Politburo meeting had mentioned countercyclical policy adjustment since 2020. The Chinese government is determined to maintain a healthy economy environment which is positive for businesses.

South Korea’s KOSPI Index gained 2.66% on foreign fund inflow despite weak economic data. The IMF lowered S. Korea’s growth forecast to 1.4%, marking the 5th consecutive downward revision. Korea’s household debt has reached unsustainable levels, with the household debt-to-GDP ratio standing at 105% in 4Q22 which would negatively affect domestic consumption.

Taiwan’s TWSE Index made a marginal gain of 1.36%. The poor share performance of heavy weighting TSMC following its weak result announcement was a drag on the index. Taiwanese exports remained weak and continued to fall for the tenth consecutive month in June. The export orders totaled US$44.18bn in June, down 3.3% MoM (down 5.2% seasonally adjusted) and 24.9% YoY. The decline is greater than last month’s 17.6% contraction, as well as consensus of 20.3% YoY decline.

Singapore’s STI gained 5.24%. Based on advance estimate, Singapore’s GDP grew by 0.7% YoY in 2Q23, stronger than a final 0.4% growth in 1Q and above market expectations of a 0.6% growth. This was the 10th consecutive quarter of increase, on the back of an acceleration in the services sector (3.0% vs 1.8% in 1Q) on the back of a rebound in wholesale & retail trade, alongside a faster rise in the output of information & communications and a further increase in accommodation & food service, real estate, and other services.

Malaysia’s KLCI gained 6.01% on domestic fund buying and optimism on the upcoming election in 6 States. Malaysia’s investment momentum, which has seen strong growth since Q1 2023, is expected to maintain its upward trajectory in Q2 2023, according to the Minister of Investment, Trade and Industry (MITI), Tengku Datuk Seri Zafrul Abdul Aziz.

Thailand’s SET Index gained 3.52% on positive sentiment, despite the delay in the formation of a new government following the General Election in May 2023. The consumer confidence index of the University of the Thai Chamber of Commerce improved for the twelfth month in a row, to 56.7 in June 2023, up from 55.7 the previous month. It was the highest reading since February of 2020, bolstered by sustained tourist recovery and the expectation of at least 25 million visitors in 2023. However, political uncertainty is weighing on consumer sentiments.

Jakarta Composite Index gained 4.05%. Trade data suggests weaker economic activities both in internal and external demand. Indonesia experienced a decline in its monthly export value in June, with a decrease of USD1.1bn to USD20.6bn compared to May’s USD21.7bn, resulting in a contraction of 21.2% YoY (vs. 1.0% YoY expansion in May). Similarly, the value of imports significantly decreased, by USD4.1bn to USD 17.2bn (vs. USD21.3bn in May), showing an 18.3% YoY contraction (vs. 14.4% YoY expansion in May).

The Philippines PSE Index gained 1.91%.  Inflation figure in June continued to decline, coming in at 5.4%.  It is the fourth consecutive month of decline. On a positive note, the International Monetary Fund (IMF) raised its growth outlook for the Philippines to 6.2% this year from the 6% forecast it gave in April, as domestic demand is expected to remain robust.

Vietnam’s VN-Index gained 9.17%, driven by positive second quarter corporate earnings announcements. External demand continued to be a drag however. In the first half of 2023, Vietnam’s exports declined 12.0% YoY to USD164.7bn while imports dropped 18.4% YoY to USD151.8bn, leading to a trade surplus of USD12.8bn (which increased to USD13.2bn as of July 15, 2023). The weak import data and recently poor Manufacturing Purchasing Manager Index reading of 46.3 in June reaffirmed the weak domestic demand.

The string of rate hikes since 2021 and their impact on economic growth, in particular how severe the global economic recession will be, will remain the focus of investors’ concern. US corporate earnings had surprised on the upside and resilient employment and consumption data have raised expectation of a soft landing for the US economy, although a recession can still not be ruled out. Geo-political developments will remain on investors’ radar screen. US economic data and interest rate trend and expectation on the Fed’s rate decisions will continue to have a major influence on investors’ investment decisions on risk assets. The easing of inflation rate in recent months has lifted investors’ sentiment, in particular in US risk assets. The US headline consumer price index (CPI) continued to ease with the latest reading at 3.0% in June.

The market corrections in recent periods would present opportunities, in particular in Chinese equities on depressed valuation, and expansionary Chinese policies to support economic activities.

We remain watchful of geo-political developments as well as policy directions in the major economies, in particular US and China.  US economic and inflation data and policy responses in terms of rate hikes in 2023 will affect market sentiments and liquidity, not just in the US but world wide. The market seems to have factored in a peak in interest rates in 2023, though risk remains. In Asia, the focus is on the extent of China’s economic recovery following the end of its “zero Covid” policy. China’s economic data post-Covid have been weaker than expected.  The Chinese property sector recovery remains weak, and any sign of stabilization will have positive catalyst for the economy and risk assets.  The Chinese government has made known its intention to take counter-cyclical policy measures to maintain a healthy economic environment.

While we are cautiously optimistic, there remains headwind for risk assets, including high interest rate and slower economic activities in 2023, as well as the still relatively high valuations in the developed markets. The continuing geo-political tension in Europe and in East Asia can have major implications for businesses and economic activities, and will keep risk premium elevated at times and result in markets volatility. We will be watchful on these.

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 increased expectations of investors and 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 article 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

For the month of June 2023, the MSCI Far East ex-Japan Index gained 1.70%, compared to the MSCI World Index’s 5.93% gain. The performance of the Far East ex-Japan markets rebounded from the previous month’s loss on bargain hunting in Chinese risk assets which had suffered a sharp correction in previous month. The ASEAN Index underperformed, declining 0.27%. Markets that performed relatively better were South Korea shares (+4.24% in local currency term), Vietnam shares (+4.19%) and Hong Kong shares (+3.74%), while the laggards were Thailand shares (-1.98%), Malaysia shares (-0.75%) and China A shares (+1.16%). Performances of regional currencies was mixed against the USD. The best performing currencies were Philippines Peso (+1.76%) and Korean Won (+0.60%), while the laggards were Chinese Yuan (-2.00%) and Thai Baht (-1.66%).

Major US indices performed well on resilient economy activities data. Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned +4.56%, +6.47% and +6.59% respectively. Core retail sales (+0.4%) and core durable goods orders (+0.7%) were both stronger than expected, while housing activity: home sales, building permits and housing starts also rebounded. Headline inflation fell sharply to 4% YoY, but core inflation only edged down to 5.3%. The Fed paused the hike in interest rate for the first time in 15 months – with the target rate range at 5-5.25% – although the updated dot plot indicated two further 25bps hikes later this year.

The Stoxx Europe 600 Index gained 2.25%.  Business surveys continued to soften in June, though the Composite PMIs remained in “expansion” territory in the eurozone. Downwardly revised GDP figures showed that the euro area entered a technical recession in the first quarter. Headline inflation in the euro area fell to 5.5%, but core inflation edged up to 5.4% in June. Central banks continued to raise their respective policy rates, including the ECB (+25bps to 3.5%), BoE (+50bps to 5%), SNB (+25bps to 1.75%), and even the Central Bank of Turkey (+650bps to 15%).

Hong Kong and H shares indices gained on bargain hunting, with Hang Seng Index and Hang Seng China Enterprises Index gaining 3.74% and 4.24% respectively. However, China’s A shares index declined 0.80%. The central bank lowered rate by 10 bps for the month. China’s economic activities continued to be lacklustre which disappointed investors. Manufacturing activity remained in contracting mode with manufacturing purchasing managers index (PMI) at 49.0 in June. The non-manufacturing PMI, which covers both service and construction sectors, remained in expansion territory, but pulled back to 53.2 in June from 54.5 in the previous month.

South Korea’s KOSPI Index declined -0.50% on foreign fund inflow despite weak economic data. The OECD lowered the growth rate for the Korean economy this year from 1.6% to 1.5%, which was attributed to sluggish private investment, a decline in exports (especially in semiconductors), and a sluggish housing market. Estimate for Korea’s GDP for 2024 was also lowered to 2.1% from 2.3%, while that for the global economy was maintained at 2.9%.

Taiwan’s TWSE Index gained 2.03%, benefiting from strength in the global technology sector. Taiwanese exports remained weak and continued to fall for the ninth consecutive month in May, in part because of low demand from China amid its slow economic recovery, according to the Ministry of Finance (MOF). Exports last month were down 14.1% YoY to US$36.13 billion, and imports slid 21.7% YoY to US$31.25 billion, leaving a trade surplus of US$4.89 billion, up 130.4% YoY.

Singapore’s STI gained 1.49%. Singapore’s non-oil domestic exports (NODX) slumped by 14.7% YoY in May, worse than forecasts of an 8.1% drop, and after a 9.8% decline in April. The latest reading marked the 8th consecutive period of contraction and the steepest fall in three months, due to faster drops in sales of both electronic and non-electronic products. Sales decreased mainly to Hong Kong (-41.2%), Malaysia (-26.2%), and Japan (-20.4%), while sales to the US (+4.8%), and China (+3.7%) rose. On a seasonally adjusted basis, NODX plunged 14.6% in May, reversing sharply from a downwardly revised 2.6% gain in April, missing market consensus of a 1.3% decline.

Malaysia’s KLCI declined 0.75%. MIDF Research forecasts headline Consumer Price Index (CPI) inflation to moderate to 3.0% in 2023 from 3.4% last year with upward price pressures from food inflation and increased demand. The Statistics Department reported that Malaysia’s Producer Price Index (PPI) contracted at a faster pace of 4.6% YoY in May 2023 versus the 3.0% drop posted in the preceding month.

Thailand’s SET Index declined 1.98% amidst political uncertainty following the general election. Thailand’s industrial output fell 3.14% YoY in May, better than market expectations of a 4.5% drop and following an upwardly revised 8.71% slump in the previous month. It was the eighth consecutive month of decrease in industrial activity, but the smallest decline since February, boosted by strength in the crucial tourism sector and higher investment. For the first five months of the year, the country’s industrial production shrank by 4.49% from a year earlier. On a monthly basis, industrial output surged by 14.23% in May.

Jakarta Composite Index eked out a small gain of 0.43%. The S&P Global Indonesia Manufacturing PMI declined to 50.3 in May 2023 from April’s six-month high of 52.7. The latest figure indicated the 21st straight month of expansion but the weakest pace since last November, as output grew softer amid a renewed contraction in new orders. Indonesia’s May inflation figures (+0.09% MoM, +4.00% YoY) were lower than consensus expectations of +0.32% MoM, +4.24% YoY and lower than the Bank of Indonesia’s inflation forecast of +4.51% YoY.

The Philippines PSE Index declined -0.14%. The annual inflation rate in the Philippines dropped to 6.1% in May 2023 from 6.6% in the previous month, less than market forecasts of 6.2%. It was the lowest reading since last June, with food prices increasing the least in eight months (7.4% vs 7.9% in April).

Vietnam’s VN-Index gained 4.19% despite soft economic data. The S&P Global Vietnam Manufacturing PMI fell to 45.3 in May 2023 from 46.7 in April, indicating the sixth deterioration in business conditions in the past seven months and registering the sharpest decline since September 2021 due to weakened demand. New orders decreased at the fastest pace in 20 months, with export orders falling for the third consecutive period. As a result, firms also reduced output for the third successive month and at a marked pace.

The string of rate hikes since 2021 and their impact on economic growth, in particular how severe the global economic recession will be, will remain the focus of investors’ concern. Corporate earnings had surprised on the upside and expectation of US economy going into recession has also abated. Geo-political developments will remain on investors’ radar screen. US economic data and interest rate trend and expectation on the Fed’s rate decisions will continue to have a major influence on investors’ investment decisions on risk assets. However, it has become a tailwind risk factor. The easing of inflation rate in recent months has lifted investors’ sentiment, in particular in US risk assets. The US headline consumer price index (CPI) continued to ease with the latest reading at 4.0% in May. The market corrections in recent periods would present opportunities, in particular in Chinese equities on depressed valuation, and expansionary Chinese policies to support economic activities.

We remain watchful of geo-political developments as well as policy directions in the major economies, in particular US and China.  US economic and inflation data and policy responses in terms of rate hikes in 2023 will affect market sentiments and liquidity, not just in the US but world wide. The market seems to have factored in a peak in interest rates in 2023, though risk remains. In Asia, the focus is on the extent of China’s economic recovery following the end of its “zero Covid” policy. China’s economic data post- Covid have been weaker than expected.  The Chinese property sector recovery remains weak, and any sign of stabilization will have positive catalyst for the economy and risk assets.

While we are cautiously optimistic, there remains headwind for risk assets, including high interest rate and slower economic activities in 2023, as well as the still relatively high valuations in the developed markets. The continuing geo-political tension in Europe and in East Asia can have major implications for businesses and economic activities, and will keep risk premium elevated at times and result in markets volatility. We will be watchful on these.

 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 increased expectations of investors and 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 article 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.