10 November Weekly Market Recap

1. The global financial markets wrapped up the week on a mixed note. In eveloped markets, Japan experienced positive gains, while the United States(US) and Europe emerged as the largest drags.

2. Across Asia, the markets delivered mixed returns throughout the week, with Korea and Taiwan experiencing the largest gain, while Thailand and China offshore declined. 

3. In Malaysia, the FBMKLCI ended the week on a slightly negative note, driven by the cautious sentiment in the regional market afterthe latest comment from the US FederalReserve(Fed)

4. Turning to bond market, the price of the 10-year U.S. Treasury note closed lower over the week, with yields once again rising higher after stabalising around 4.5% earlier. The shift was driven by the recent hawkish comment from the Fed regarding their latest views on inflation and interest rate. (Bond prices move in the opposite direction of bond yields)

1. In the US, market caution returned as the latest comment from the Fed expressed uncertainty in their battle against inflation and signalled a potential further tightening of policy. The comments undermined expectations of a peak in interest rate. On macro front, the trade deficit widened to $61.5 billion in September, while the number of Americans filing for unemployment benefits in October eased to 217,000 compared to the precious month's 220,000²

2. In Europe, The HCOB Eurozone Composite PMI was confirmed at 46.5 in October 2023, down from September's 47.2 and the lowest since November 2020. The HCOB Eurozone Services PMI was unrevised at 47.8 in October 2023, marking the third consecutive month of falling services sector activity and the deepest contraction since February 2021.³

3. In China, trade surplus in October significantly narrowed to USD 56.53 billion, with exports falling more than expected due to persistent weak demand from abroad while imports unexpectedly grew. China consumer price index also dropped by 0.2% in October compared to last year, driven by ample agricultural supply and a reduced consumption after the Golden Week holiday.⁴

Our current stance is neutral on both equity and fixed income, with preference for income-focused funds. Our strategy emphasises quality, growth, and income in stocks and credits. We are exercising caution with USD assets and believe that Asian equities and fixed income present more value in the short term.

1. We find bonds appealing as we perceive a higher likelihood that central bank hiking cycle will end soon. We also see potential for capital gains in the event of weaker economic growth. Therefore, we maintain our preference for investment grade bonds with longer durations as our preferred investment choice. For Malaysia, the projected improvement to the budget deficit, provided in the Budget 2024, improved the outlook for domestic bonds.
    
2. We find bonds appealing as we perceive a higher likelihood that central bank hiking cycle will end soon. We also see potential for capital gains in the event of weaker economic growth. Therefore, we maintain our preference for investment grade bonds with longer durations as our preferred investment choice. For Malaysia, the projected improvement to the budget deficit, provided in the Budget 2024, improved the outlook for domestic bonds.
    
3. We also favour income-focused approach to ride out volatilities arising from geopolitical tensions, inflationary issuues, and recessionary concerns.