6 January 2023: Weekly Market Recap

1. Developed markets showed mixed market performance over the week with United States (U.S.) and Europe starting on a positive note while Japan lagged for the week. 
2. Asia Pacific markets gained modestly over the week. In China, stock market rose driven by reports that Hong Kong would reopen its border to mainland China.
3. In Malaysia, FBMKLCI posted a weekly decline as concerns over an economic slowdown persisted. Nevertheless, the overall sentiments continue to be stable after the formation of a unity government.
4. Global bonds were modestly positive with yields moving lower driven by news that global economy may slow down further. (Note: Bond prices and yields move in opposite direction).

1. The U.S. markets started the week on a positive note supported by encouraging job and payroll reports which raised hopes for a potential soft landing (soft landing refers to an effort on the part of the US Fed to slow the economy and bring down inflation, while preventing the U.S. from entering a recession). The latest services and manufacturing activity continue to fall into the contraction territory which mean reduction in activity.²
2. Eurozone inflation reduced below 10% is partly supported by the recent decline in energy price. The Services Purchasing Managers Index, although still below 50, has been showing signs of recovery for a second consecutive month.³ 
3. The Chinese government has signalled further support to the property sector and may look to ease the stringent “three red lines” (debt thresholds) policy. This marks a significant shift in China’s real estate policy following a series of measures rolled out since November 2022 to restore confidence in its market.⁴ 

      Our broad strategy continues to favour selective approaches, and focus on the themes of Quality Growth, Income and Sustainability.

1. On equities, we prefer quality factors as the macro and geopolitical backdrop remained uncertain.⁴
2. On Fixed Income, our preference remains on investment grade & that of longer duration. As we foresee volatility to stay elevated, we are keeping a bias for higher quality credit. We like bonds with an investment grade rating, ideally in the AA or A, and which could operate in a business that is somewhat immune to the economic cycle.
3. For medium to long-term exposure, we prefer assets that offer structural opportunities. The shift towards energy, environmental, food, and technological security are likely to be among the key long-term growth drivers in the years to come.