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  /  Article   /  Market Review July 2023

Market Review July 2023


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.