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  /  News   /  Monthly Review May 2022

Monthly Review May 2022

The best performing regional indices were Indonesia (+2.23%), Malaysia (0.82%) and Australia (-0.86%), while the laggards were Vietnam (-8.40%), Philippines (-6.56%) and Shanghai SE Composite (-6.31%). Regional currencies’ performance against the USD was mixed. The best performing currencies were Vietnamese Dong (-0.57%) and Indonesian Rupiah (-0.88 %).

For the month of April 2022, the MSCI Far East ex-Japan Index declined 5.85%, less than the MSCI World Index’s 8.43% decline.

Major indices in the US, in particular tech stock index, saw substantial falls: Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite declined 4.91%, 8.80% and 13.26% respectively. Risk assets continued to decline. The war in Ukraine, lockdowns in China and the prospect of substantially tighter US monetary policy all weighed on sentiment. There was marked increase in market risk premium and volatility. With US headline inflation standing at 8.5%, the highest level since 1981, several members of the Fed’s Board of Governors used speeches in April to highlight their desire to take rates back to neutral as quickly as possible. The potential higher interest rate environment prompted by rising inflation and a strong labour market led the Fed Chairman to become more hawkish.

The Stoxx Europe 600 Index declined 1.20% amidst concerns over policy tightening, inflation and geopolitical tension. In Europe, gas prices remained at elevated level, and were 42% higher year-to-date. Labour markets continued to be the bright spot, with unemployment rates sitting close to multi-decade lows. Despite strong wage growth, consumer confidence in the eurozone has tumbled to levels consistent with a recession. April’s flash purchasing managers’ indices (PMIs) were a little more positive in the eurozone, with the composite index rising to 55.8 (from 54.9 in March) despite a sharp fall in German manufacturing.

Hong Kong and H shares indices declined, with Hang Seng Index and Hang Seng China Enterprises Index dropping 4.13% and 3.02% respectively. China’s A shares index declined 4.89%. China saw major Covid-19 outbreak in several cities, and imposed lockdowns to contain the spread. Shanghai spent all of April in full lockdown, and market sentiment was dented further towards the end of the month when reports emerged of new containment measures being implemented in Beijing following appearance of Covid cases there. Economic activities had deteriorated and growth outlook has investors’ reducing Chinese risk assets.

South Korea’s KOSPI Index declined 2.27% in line with regional index. South Korea’s seasonally adjusted Business Survey Index (BSI) of conditions in its manufacturing sector rose to 84 in April from 83 in March according to the Bank of Korea. The manufacturing BSI outlook for May rose to a seasonally adjusted 85, up from the previous outlook index of 83 for April.

Taiwan’s TWSE Index declined 6.22%.  The sharp index correction was driven by the index heavy semiconductor stocks as investors reduced risk assets despite good earnings fundamental. Taiwan’s March export orders were up 16.8% y.o.y marking a 25th straight month of y.o.y growth. The March total also topped the US$60bil level for the first time ever. However, consumer confidence dropped to a 10-month low in April. The Consumer Confidence Index (CCI) dropped for the third consecutive month, according to the Research Center for Taiwan Economic Development at National Central University

Singapore’s STI declined 1.51%. Singapore’s annual inflation rate climbed to 5.4% in March from 4.3% in February, and was above market estimates of 4.7%. This was the highest reading since April 2012 with main upward pressure coming from cost of food (3.3% vs 2.3% in February); housing (4.4% vs 4.1%); healthcare (1.1% vs 1.9%); transport (19.7% vs 12.8%); recreation & culture (2.2% vs 0.8%); and education (2% vs 2%). Core consumer prices gained 2.9% y.o.y in March, the most since March 2012, surpassing estimates of 2.4%. On a monthly basis, consumer prices went up 1.2% in March, the most since July 2011. The government expects 2022 annual inflation to be between 4.5-5.5%, while core inflation to average between 2.5-3.5%.

Malaysia’s KLCI gained 0.82%. Manufacturing PMI improved in April to 51.6 compared to 49.6 in March. Malaysia’s Consumer Price Index (CPI) in March rose by 2.2%, surpassing the average inflation for the January 2011-March 2022 period which stood at 1.9%, according to the Statistics Department. Food inflation remained as a major contributor to inflation. The 4.0% growth in the food and non-alcoholic beverages group was largely due to an increase in the food at home component which rose by 4.3% compared to 4.1% recorded in February.

Thailand’s SET Index declined 1.64%. The Fiscal Policy Office (FPO) has downgraded its 2022 economic growth forecast to an average of 3.5% from 4.0%, mainly because of the Russia-Ukraine war and its effect on domestic energy prices. The FPO expects economic growth to be in the range of 3-4%, compared with estimates of 3.5-4.5% in January. The office changed its expected 2022 headline inflation rate to 5%, up from the previous estimate of 1.9%

Against market falls witnessed in most other markets, the Jakarta Composite Index gained 2.23%. Indonesia’s Manufacturing PMI improved to 51.9 in April from 51.3 in the prior month. The Central Bank of Indonesia (BI) maintained the policy rate at 3.50%, deposit facility rate at 2.75%, and lending facility rate at 4.25% at its April meeting. The BI reduced domestic economic growth forecast for 2022 to a range of 3.5-5.3% from the previous range of 4.7-5.5%.

The Philippines PSE Index declined 6.56%. April manufacturing PMI improved to 54.3 from 53.2 in the previous month. The Philippine central bank may consider a rate hike in June as the economic recovery likely gained more traction in the first quarter, according to Bangko Sentral Pilipinas (BSP) Governor Benjamin E. Diokno. The first-quarter gross domestic product (GDP) data will be released on May 12th. Diokno hopes the new data will show around 6-7% growth in the first-quarter.

Vietnam’s VN-Index declined by 8.40%. Vietnam’s industrial production rose by 9.4% y.o.y in April, after an upwardly revised 9.1% gain a month earlier. This is the sixth straight month of increases in industrial output and the steepest pace since May 2021, mainly boosted by a faster rise in manufacturing production (11.3% vs 9.6% in March), as the economy recovered further from disruptions caused by the COVID-19 pandemic. For the first four months of the year, industrial output advanced 7.5% from the same period of 2021.

Given the corrections in recent period, we see room for more optimism on risk assets on valuation becoming more attractive, especially in Asia ex. Japan, as well as the positive impacts of expansionary Chinese policies to support economic activities, although there is some concern about the resurgence of COVID-19 cases in several Chinese cities and their potential impact on growth outlook. The on-going Russia-Ukraine conflict event has increased risk premium significantly. We are also watchful of developments in the Russia-Ukraine conflict as well as policy directions in the major economies, in particular US and China, which will have major implications on the economies in general as well as on specific sectors.  US policy responses will face headwinds going into 2022. Tapering and rate hike in 2022 will affect liquidity and increase cost of borrowing in the system. In Asia, the focus is on China’s policy responses to reopening of cities due to COVID-19 resurgence, and China’s Covid-19 policy going forward.

There remains headwind for risk assets, including rising bond yields and interest rate hikes to contain inflation and relatively high commodity prices, as well as the still relatively high valuations in the developed markets. The geo-political issues between China and US, and the new tension between US/Europe and Russia over Ukraine will keep risk premium elevated at times and result in markets volatility.

We are adding to risk assets as valuation become more attractive. 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 increasingly socially-aware demands of investors, as well as 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.



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