Market Review November 2024
Risk assets in major markets declined in October 2024, with concerns rising over potential inflation resurgence and a moderating growth outlook. Optimism for additional rate cuts similar on September’s was dampened. The Far East ex-Japan index underperformed against developed markets, with the MSCI Far East ex-Japan Index down 3.59%, compared to a 2.04% decline in the MSCI World Index. ASEAN equities underperformed, with a -5.43% return, though Indonesia’s market fared better at 0.61%. Taiwan led gains in the region, rising 2.68%, while the laggards were the Hang Seng Index (-3.86%) and Hang Seng China Enterprises Index (-3.27%). Regional currencies weakened against the USD, with the Taiwan NT (-1.12%), Chinese Yuan (-1.40%), and Singapore Dollar (-2.63%) performing best, while the Malaysian Ringgit (-5.81%) and Korean Won (-4.52%) underperformed.
US markets also fell as investors adjusted their rate expectations. Core inflation remained high in September at 3.3%, above expectations. Nonetheless, the US economy showed resilience, though the upcoming election kept some investors cautious. The Dow Jones, S&P 500, and Nasdaq dropped by 1.34%, 0.99%, and 0.52%, respectively. The US composite PMI held steady at 54.3 in October, while the manufacturing PMI improved to 48.5, indicating continued contraction in factory activity.
In Europe, the Stoxx Europe 600 Index declined 3.35%. The eurozone’s October inflation rose to 2.0% year-on-year, mainly due to energy base effects, up from 1.7% in September. The ECB announced its third 25 bp rate cut of the year, lowering the deposit rate to 3.25%, amidst signs of economic slowdown, particularly in manufacturing, while services showed strong demand.
Hong Kong and H-shares indices stabilized after initial enthusiasm over China’s economic support measures in late September. The Hang Seng and Hang Seng China Enterprises Index corrected 3.86% and 3.27%, respectively, while Chinese A shares declined 3.16%. China’s September exports totaled US$303.71 billion, rising 2.4% year-on-year, below market expectations of 6.0% due to weaker demand. China’s GDP grew 4.6% in Q3 FY2024, slightly exceeding expectations. The PBOC announced a “Securities, Funds and Insurance companies Swap Facility (SFISF)” with an initial RMB500 billion scale to support eligible financial firms, which lifted investor sentiment.
South Korea’s KOSPI Index dropped 1.43%, affected by a correction in Samsung Electronics on concerns over earnings. South Korea’s economic outlook weakened, with Q3 GDP up just 0.1% from the previous quarter as exports slowed. The central bank downgraded growth projections to around 2.2% for the year.
Taiwan’s TWSE Index gained 2.68%, supported by TSMC’s strong Q3 results and positive outlook. Taiwan’s GDP grew 3.97% year-on-year in 3QFY2024, down from 5.06% in Q2 but surpassing the expected 3.4% growth. September export orders reached US$53.79 billion, rising 7.1% month-on-month but down 3.5% when seasonally adjusted, and growing 4.6% year-on-year, below consensus estimates.
Singapore’s STI fell by 0.74%. The economy expanded 4.1% year-on-year in Q3, accelerating from 2.9% in Q2, led by a 6.6% increase in goods-producing industries, with manufacturing and construction up 7.5% and 3.1%, respectively.
Malaysia’s KLCI dropped 2.85% due to foreign fund profit-taking and Ringgit depreciation. The economy grew faster than expected in Q3 at 5.3% year-on-year, with gains in services and manufacturing, on track for the government’s revised growth forecast.
Thailand’s SET Index edged up 1.19%. The Bank of Thailand cut its key rate by 25 bps to 2.25% in October, its first cut since 2020, to address low inflation and weak economic conditions. Economic growth is forecasted at 2.7% in 2024, led by tourism and consumption, though challenges remain for exports and SMEs.
The Jakarta Composite Index rose 0.61% despite foreign profit-taking. Indonesia’s exports grew 6.44% year-on-year to USD 22.08 billion in September, though below market expectations of 8%. This marked the sixth consecutive month of export growth, driven by non-oil and gas exports.
The Philippines’ PSE Index fell 1.78% on profit-taking. The central bank cut its benchmark rate by 25 bps to 6%, marking a second consecutive cut, aligning with expectations.
Vietnam’s VN-Index declined 1.82%. Retail sales rose 7.6% year-on-year in September, marking the 34th month of growth, though at a slower pace than the previous month, impacted by Typhoon Yagi that happened in the early of this month. Domestic consumption continued to support the economy.
After many months of US Fed rate hikes since 2022 to curb inflation, the Fed finally cut rates by 50 basis points (bps) at its 18 September meeting. Markets were anticipating another possible cut by year-end. The Fed’s September rate cut has received a positive reaction from markets, although it was largely factored in earlier. Moving forward, the Fed’s rate decisions will likely be influenced by balancing inflation risks against economic data, particularly concerning the labour market.
The resilience of US economic data, prospects of further rate cuts, and better-than-expected corporate earnings have boosted investor sentiment, pushing the US stock market to new highs. However, with high market valuations and ongoing geopolitical tensions, any downturn in the US economy impacting corporate earnings could significantly affect the market. Escalating geopolitical conflicts, especially military tensions in the Middle East, could also pose major risks to markets.
We are closely monitoring geopolitical developments and major economies’ policy directions, especially from the US and China. The ongoing Israel-Hamas conflict raises concerns about further instability in the Middle East. In the US, economic, labour, inflation data, and interest rate policies will influence market sentiment and liquidity. Added uncertainties include the outcome of the US Presidential election between Donald Trump and Kamala Harris, which could lead to shifts in US economic and foreign policies.
In Asia, the focus is on China’s slower-than-expected economic recovery, particularly in the struggling property sector. Any signs of stabilization here would be a positive catalyst for China’s economy and risk assets. In September, the Chinese government introduced new monetary, fiscal, and policy measures aimed at boosting investment, liquidity, and confidence in property and financial markets. While these initiatives have improved market sentiment, their long-term impact remains to be seen, with market observers expecting further stimulus.
While interest rates are easing, headwinds for risk assets remain. These include the lingering impact of high rates on economic activity, uncertainties in US policies post-election, high valuations in the US, and ongoing geopolitical tensions in Europe, the Middle East, and East Asia, as well as China’s slower economic growth. However, we believe there is cautious optimism in our investment space. Following years of sell-offs, the low valuation of China equities offers potential upside, especially after recent policy changes.
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.