17 November Weekly Market Recap

1. The global financial markets wrapped up the weekon a positive note, with Europe leading the gains among the developed markets, followed by the United State (US) and Japan.

2. Across Asia, the majority of the markets were on the uptrend throughout the week, with Taiwan and Korea leading the way, closely followed by Thailand and China offshore. 

3. In Malaysia, the FBMKLCI in Malaysia ended the week on a positive note, fuelled by optimism in the regional market.

4. Turning to bond market, the price of the 10-year U.S. Treasury note closed on a positive note, with yields stabalising around 4.40 to 4.5%. The shift was driven by the recent market expectation that the U.S. Federal Reserve's (FED) rate-hikinh campaign could finally be over. (Bond prices move in the opposite direction of bond yields)

1. In the US, the annual inflation rate slowed to 3.2% in October from 3.7% in September. The core inflation, which excludes volatile items such as food and energy, edged down to a low not seen in over two years, reaching 4% in October 2023, from 4.1% in the prior month. Additionally, retail sales incresed by 2.5%, slightly easing from the revised 4.1% growth in the previous month.²

2. In Europe, the economy rose a meagre 0.1% year-on-year in the third quarter of 2023, the weakest performance since the contractions in 2021. Industrial production declined by 1.1% month-over-month in Septemberm surpassing the anticipated 1% decrease. The headline inflation was confirmed at 2.9% year-on-year in October, the lowest figure since July 2021 but still surpassing the Europe Central Bank's (ECB) target of 2%.³

3. In China, industrial production expanded by 4.6% year-on-year in October, supported by increased mining and manufacturing activities. In the job market, the unemployment rate remained stable at 5% in October, matching the rate from the previous month. In monetory policy news. the People's Bank of China (PBOC) injected RMB 1.45 trillion in the banking system via its medium-term lending facility compared with RMB 850 billion in maturing loans, its largest net injection since December 2016.⁴

Our current stance is neutral on both equity and fixed income, with a 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 preffered investment choice. For Malaysia, the projected improvement to the budget deficit, provided in the Budget 2024, improved the outlook for domestic bonds.
    
2. On equities, we prefer quality and dividend-paying stocks for their defensive characteristics, which can provide resilience in the face of uncertain macroeconomic and geopolitical conditions. Our positive outlook is focused on Asia and includes strategic positions in various areas: a) the bottoming tech hardware cycle, b) long-term growth potential driven by low penetration rates (such as India), c) recovery plays and structural themes in ASEAN, d) selective sectors benefiting from China's reopening, and e) Malaysia's growing optimism due to political stability and potential gains from the New Energy Transition Roadmap, the New Industrial Master Plan 2030 and projected improvement to the budget deficit detailed in the Budget 2024.
    
3. We also favour income-focused approach to ride out volatilities arising from geopolitical tensions, inflations issues, and recessionary concerns.