Monthly Review

Dear Investor,

Market Review

In December 2019, the MSCI Far East ex-Japan Index gained 7.01%, outperforming the MSCI World Index which was up by 2.89%.

The Dow Jones Industrial Average Index (DJIA) was up 1.74% over the month, while the S&P 500 index gained 2.86% and the Nasdaq Composite Index continued to rally, rising 3.54%. The US Dollar index was down 1.92% in December. US stocks rallied after the president said that the US and China were nearing a trade deal that could avoid fresh tariff and potentially roll back some of the existing duties.  

In the Eurozone, the Stoxx Europe 600 Index was up 2.06%on news about Phase one of US China trade deal and Boris Johnson’s election victory in the UK.            

The China A-shares were up 7.00%, while the Hang Seng Index rallied 7.00% as well. The markets rallied amid de-escalation of US China trade tension as both sides reached a Phase one trade deal which will be signed on 15th January 2020.     

The South Korean market gained 5.25%, while Korean Won appreciated by 2.23% on the back of easing US China trade war risk and improved sentiment in the memory sector amid early restocking demand from customers.

Meanwhile in Taiwan, the index continued its uptrend and rose 4.42%. Tech sector continued to record decent gains amid rising 5G unit expectations and the incrementally positive outlook for major tech names in 5G related space.      

Singapore’s STI was up 0.91% in December. Singapore’s November PMI edged up to 49.8 from 49.6 for the month of October. In spite of the improvement, the reading pointed to the seventh consecutive month of contraction in manufacturing sector. Factory output and inventory expanded faster while new orders, new exports and employment contracted at a softer pace. 

Malaysia’s KLCI rebounded 1.72%. During the month, the cabinet decided to merge Malaysia Aviation Commission (MAVCOM) with the Civil Aviation Authority of Malaysia (CAAM), which caused Malaysia Airport Holdings Berhad (MAHB)’s share price to fall 8.43% m.o.m. The three best-performing KLCI stocks in December were Sime Darby Plantations (+9.44% m.o.m), Petronas Gas (+8.49% m.o.m), and KL Kepong (+6.26% m.o.m). Oil palm plantation shares performed well on improvement in the price of crude palm oil.

In Thailand, the SET index eased 0.68% on concern about political risk after the Future Forward Party (FFP) called for rally after being targeted by the Election Commission (EC) for the party’s dissolution.  

The Jakarta Composite Index (‘JCI’) gained 4.79%, while Indonesia Rupiah appreciated 1.93% m.o.m. Energy and Financials outperformed in December, while Staples and Materials lagged.     

In the Philippines, the PSEi gained 0.99%. The index was volatile in the month.  The market rose initially on optimism of the US and China reaching a Phase one trade deal.  It subsequently pulled back after President Duterte questioned the water concession agreements that the Metropolitan Water and Sewerage System (MWSS) has with Maynilad and Manila Water (MWC) claiming that it contained numerous “onerous” provisions. The market calmed in the latter part of the month after the government’s justice and finance chiefs said the agreements would not be revoked but would rather be renegotiated in terms of their alleged onerous provisions.

Vietnam’s VN-Index retreated 1.01% in December. The market lagged behind its regional peers amid heavy offloading pressure lingering over real estate and consumer names. 

Crude oil price (WTI) was up 10.68% to USD61.06 per barrel in December, while Brent crude gained 5.72% to USD66.00 per barrel as OPEC+ agreed on output cut and expectation that US partial trade deal with China will help boost the fragile outlook for global oil demand. Crude palm oil (CPO) prices rallied 16.07% to RM3,041/MT in December.

News that the US and China have reached a Phase one agreement of the trade deal, reportedly to be signed on 15th January 2020, has improved market sentiments.  While the possibility of the agreement not being sealed cannot be ruled out, we are cautiously optimistic of the prospect of the Phase one agreement being signed, and the positive impact it will have on the markets.  Going forward, in the lead to the Presidential election, market environment is expected to be relatively benign.  However, we are still mindful that uncertainties will remain, for we believe that the tension between the US and China will be prolonged as the differences appear to transcend trade issues. As a result, the market can still be expected in response to developments. On top of that, events that heighten geo-political risks, such as the recent killing of Iran’s top general in Iraq, can bring about severe consequences for the world economy and markets.

Hence, we remain cautious on the equity market outlook for 2020.  The market uncertainties and the attendant volatilities would provide opportunities to increase our equity exposure when we see valuations have become compelling, especially for quality stocks that have strong foreseeable earnings growth with low gearing. At the same time, as we never fully invest at all times, we may seek to trim our equity exposure on stocks which have rallied beyond their fundamentals.

Disclaimer: Information herein has been obtained from and is based upon sources Pheim Unit Trusts Berhad believe to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Pheim Unit Trusts Berhad judgment as of the date of the report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of units.