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  /  Article   /  Monthly Review March 2021

Monthly Review March 2021

Dear Value Investors,

February was a good month for stock markets overall, with every regional index except the CSI 300 posting positive gains m.o.m. The best performing markets in the region in local currency terms were the Ho Chi Minh Stock Index (+10.59%), Jakarta Composite Index (+6.47%), and the SENSEX Index (+6.08%). The worst performing markets were the CSI 300 Index (-0.28%), the Hang Seng China Enterprise Index (+0.34%), and the KLCI (+0.72%). Nearly all regional currencies underperformed against the greenback as the USD regained favour among investors in February, with the British Pound (+1.64%), Taiwanese Dollar (+0.51%) and Viet Dong (+0.14%) as the best performing currencies against the U.S. Dollar, while the Indonesian Rupiah (-2.08%) was the worst performing currency.

In February 2021, the MSCI Far East ex-Japan Index gained +0.79%, while the MSCI World Index was up +2.45%.

The Dow Jones Industrial Average Index (DJIA) gained +3.17% in February, and the S&P 500 index was up +2.61%, while the Nasdaq Composite Index rose +0.93%. US Treasury yields spiked against all odds at month-end, reflecting inflationary expectations of a recovering global economy; while many story stocks like TSLA which rallied during January’s retail mania gave up their gains through February. Both houses of Congress passed Biden’s historic USD1.9 tril stimulus bill; and renowned US hedge fund managers like Ray Dalio and Paul Singer stole the spotlight by going public with their prognostication of “trouble ahead” following the iterations of quantitative easing coupled with trillions of dollars of stimulus, expectation of rampant inflation, staggering valuation.

The Stoxx Europe 600 Index was up +2.31% over the month. The Eurozone’s commissioner Paolo Gentiloni sounded the warning alarm, as the region’s debt-to-GDP crossed the psychologically significant 100% mark for the first time in history. The EU has been allowed to exceed the debt to GDP limit of 60% under the Stability and Growth Pact as member countries were forced to take extreme fiscal measures to address the brutal economic shock caused by the Covid-19 pandemic.  The EU is looking toward economic rebound to bring the debt ratio to within the mandated limit, but there is recognition that the process will not be smooth as the pace of recovery is not expected to be even and the fiscal conditions do vary among member countries.  Markets settled on describing end-2020’s Brexit as “hard”, with questions popping up on whether London would remain the financial centre of Europe.

The CSI-300 Index fell -0.28%, while the Hang Seng Index was up +2.46%. China became the EU’s biggest trading partner in mid-February, overtaking the US with trade volume in goods hitting USD710 bil in 2020. The PBOC threw its weight behind a multilateral Asian central bank digital currency (CBDC) standard, which if successful may pose a threat to the existing cross-border transaction settlement standard, SWIFT.

The South Korean market recorded a gain of +1.23% for the month of February. The Bank of Korea raised its 2021 inflation forecast to 1.3% from an earlier 1.0%, but maintained its policy rate unchanged at 0.5% as widely expected. The country’s y.o.y increase in the money supply turned heads, with December’s M2 amounting to KRW3,191 tril (or 9.8% increase y.o.y.) stoking fears of possible inflation.

The TWSE index gained +5.39% in February, even as semiconductor behemoth TSMC surrendered much of the gains accumulated since the start of the year as pressure on the global semiconductor supply chain eased. Taiwan’s central bank (CBRC) intervened repeatedly in forex markets to slow the pace of the TWD’s appreciation, as the strengthening of the currency sparked an outcry among Taiwanese exporters.

Singapore’s STI gained +1.60% in February, with the Trade and Industry Ministry forecasting GDP growth of 4%-6% this year. Exports of non-oil domestic exports (NODX) increased to 7% in January from 6.6% in the previous month, indicating an improving global economy.

Malaysia’s KLCI was up +0.72% in February. The government lifted dine-in restrictions at restaurants and inter-district travel restrictions around the middle of the month, as new daily COVID-19 cases saw some moderation from January’s spike in cases. Around month-end, the nation’s beleaguered AmBank reached a settlement with the Malaysian government, offering to pay MYR2.83 bil to put its involvement with 1MDB to rest.

Thailand’s SET index rose by +2.03% in February, even as the government reduced its GDP growth forecast for 2021 to 2.5%-3.5% from 3.5%-4.5% earlier. The downward revision came on the heels of the latest economic data showing that the economy shrank less than expected in the 4th quarter of 2020, as domestic activity and exports saw some recovery after coronavirus restrictions were eased.

The Jakarta Composite Index (‘JCI’) gained +6.47%, surprising market participants with its strong showing after COVID-19 cases leaped in January. The Indonesian government increased its pandemic control budget again, bringing the amount to IDR699.43 tril from an initial IDR372.3 tril (+88%). Finance Minister Sri Mulyani Indrawati announced that the country’s GDP shrank -2.07% in 2020, describing the fall as “relatively moderate compared to other G20 and ASEAN countries”.

In the Philippines, the PSEi gained by a moderate +2.76% in February, after falling over -7% in January. FDI pledges in the country by foreign businesses fell a whopping 71% in 2020, with total foreign investment approval being at their lowest in 3 years. However, market sentiment was relatively optimistic as economist echoed the government’s view that positive GDP growth should return in the 2nd quarter of 2021.

Vietnam’s VN-Index was up +10.59% m.o.m., reversing January’s -4.3% drop after the dust settled on political uncertainty stemming from the country’s 13th Communist Party Congress, which concluded in early-February. Nguyen Phu Trong was re-elected to his third term as Vietnam’s general secretary (the highest governmental post in the country) of the ruling Communist Party at a 5-yearly party congress.

Commodities took the world by surprise after Biden’s green energy push, with copper and crude oil rallying to unexpected highs. Crude oil prices (WTI) rose +14.85% to USD61.50 per barrel in January, while Brent crude climbed 17.36% to USD66.13 per barrel. The spike in oil prices could largely be attributed to a cold spell overtaking Texas, which was unprepared for sub-zero temperatures leading to power plants shutting down and driving practically unlimited demand for oil. CPO prices were relatively flat with prices rising +1.30% to RM 3,986.00 for the month, as ESG considerations captured headlines even amidst a broader commodities supercycle narrative.

Our market outlook remains largely unchanged vis-à-vis our view at the beginning of the year. The EU commissioner’s recent announcement that the Eurozone region as a whole had finally crossed the 100% debt-to-GDP threshold sparks concern – with the PIIGS nations far exceeding that psychological boundary, and Greece at over 200%. If global markets had not previously been paying attention to globally overstretched systemic credit before, they surely would have by now.

We wish to emphasize that our current strategy prioritizes the preservation of client capital, as demonstrated by sector rotation activity performed throughout the entirety of February. We remain steadfast in seeking low valuations, low leverage, high growth, robust management and a strong track record in our investee companies. On top of that, our team has also begun reviewing our existing ESG investment framework in light of its likely increasing relevance going forward.


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.