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  /  Article   /  Market Review May 2023

Market Review May 2023

For the month of April 2023, the MSCI Far East ex-Japan Index declined 3.27%, compared to the MSCI World Index’s 1.59% gain. The performance of the Far East ex-Japan markets came off on the back of profit taking in Chinese risk assets. The ASEAN Index outperformed, despite weakness in the Thai market. Markets that performed relatively better were Philippines shares (+1.93% in local currency term) and Indonesia shares (+1.62%), while the laggards were Thailand shares (-4.97%), China H shares (-3.83%) and Taiwan shares (-1.82%). Most regional currencies depreciated against the USD. The best performing currencies were Indonesia Rupiah (+2.19%) and Vietnamese Dong (+0.05%), while the laggards were Korean Won (-2.80%) and Philippines Peso (-1.84%).

Major US indices made some gains on positive quarterly corporate results despite further stress in the banking sector. The DJIA Index rose 2.48%, while the NASDAQ Index eked out a marginal gain of 0.04%.  The headline consumer price index (CPI) continued to trend lower to 5.0% in March from 6.0%, as the Fed’s rate increases showed more impact. April flash PMIs figure showed an increase in economic activity across manufacturing and services sectors. Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite returned +2.48%, +1.46% and +0.04% respectively. The technology sector saw profit taking after strong performance in the previous month.

The Stoxx Europe 600 Index made a stronger gain of 1.92%. Eurozone data remained healthy though manufacturing remained a weak spot and the divergence between the manufacturing and service sectors further expanded. The manufacturing PMI printed at 45.5, implying a tenth consecutive month of contraction, while the services index jumped by 1.6 pts to 56.6, pushing the composite index to 54.4.

Hong Kong and H shares indices declined, with Hang Seng Index and Hang Seng China Enterprises Index declining 2.48% and 3.83% respectively. China’s A shares index also declined 0.54%. China’s economic activities continued to recover following China’s pivoting away from the “zero Covid” policy. China’s gross domestic product grew 4.5% in the first quarter of the year, boosted by increased consumption and retail sales. China’s exports unexpectedly rose in March, jumping 14.8% YoY in US dollar terms from a year earlier, partly driven by a uptick in shipments to South East Asian nations and resilient demand from South Korea and Europe.

South Korea’s KOSPI Index edged up 1.00%. The Bank of Korea (BOK) froze the benchmark rate at 3.5% for a second consecutive month. The banks’ lending rate fell for the fourth consecutive month in March due to expectations for slower policy rate hikes. Korea exports remained weak, with export to China plunging 28% in the first quarter from a year earlier due mainly to sharp decline in semiconductor shipments.

Taiwan’s TWSE Index declined 1.82%. Taiwan’s economy shrank by a worse-than-expected 3.02% during the first quarter due to a sharp fall in exports. The decline also marked the second quarter in a row of shrinkage in Taiwan’s economy, following a 0.41% drop in the last quarter of 2022. Taiwan’s industrial production index fell 14.52% YoY in March, notching the seventh-straight month of YoY declines.

Singapore’s STI edged up 0.36%. Economic data continued to be resilient. Singapore’s manufacturing production fell by 4.2% YoY in March, compared to market expectations of a 6.1% drop and an upwardly revised 9.7% decline in the previous month. Singapore’s annual inflation rate fell to 5.5% in March from 6.3% in the prior month. It was the lowest reading since April 2022, slightly below market estimates of 5.6%,

Malaysia’s KLCI declined 0.47%. Malaysia’s producer price index (PPI), which measures the prices of goods at the factory gate, declined further by 2.9% in March as against negative 0.8% in February, official data showed. This trend will help to reduce cost pressure for corporates.

Thailand’s SET Index declined 4.97%. The upcoming general election to be held on 14 May resulted in investors’ cautious stance on risk assets. Pheu Thai, the main opposition party, is expected to win the largest number of seats in the lower house, but it will remain uncertain who will emerge to be the next premier.  Domestic economy remained well supported by the tourism sector which is seeing increasing tourist arrivals. However, weak external demand dampened economic outlook  as exports dropped 4.2% from a year earlier to USD 27.65 billion in March.

Jakarta Composite Index gained 1.62%. Indonesia’s central bank kept its benchmark interest rates unchanged for a third straight meeting. It maintained its projection for Indonesia’s GDP growth at the higher end of the 4.5% to 5.3% range. Retail sales increased by 0.6% YoY in February, bouncing back from January’s first drop in 16 months of -0.6%, ahead of the holy month of Ramadan celebration.

The Philippines PSE Index up 1.93%. Economic activities continued to be sluggish. Exports from the Philippines shrank 18.1% YoY to USD 5.08 billion in February 2023, after a downwardly revised 13.1% fall in January. It was the third straight month of decline in shipments and the steepest drop since May 2020 due to further deterioration in foreign demand as the risks of economic slowdown persisted.

Vietnam’s VN-Index declined 1.46%. The State Bank of Vietnam adjusted several policy interest rates down, effective April 3, in a move to support economic growth amid global uncertainty. The term deposit rate cap was decreased by 50 bps across all tenures. The cost of borrowing was also reduced by a similar magnitude.

The string of rate hikes since 2021 and their impact on economic growth and the uncertainty as to how severe the global economic recession will be will remain the focus of investors’ concern. Hightened geo-political developments have also affected investor sentiments. The outlook on 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. The US headline consumer price index (CPI) continued to ease with the latest reading at 5.0% in March.  The threat that the failure of several regional banks in the US may develop into a larger financial crisis seemed to have raised market expectation that the Fed would be less hawkish. Given the various forces at play, the market can be expected to remain volatile.

The market corrections in recent periods present opportunities, especially in Asia ex. Japan, in particular Chinese equities on depressed valuation. The positive impacts of expansionary Chinese policies to support economic activities, the pivot from the zero-Covid strategy and resumption of normalized business operating environment are positive for Chinese risk assets, though policy changes, both within China and those from without could have significant impact on the business and economic development in China.

We remain watchful of geo-political developments 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 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.

While we are more 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 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 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.