In April 2018, the MSCI Far East ex-Japan Index was up 0.25%, underperforming the MSCI World Index which grew 0.95%.
The Dow Jones Industrial Average Index (DJIA) gained 0.25% over the month, while the S&P 500 index was up 0.27% in the same period. The month’s gains were mainly driven by earnings releases which were better than expected. However, a lot of caution still prevailed, including the continuous threats of a trade war between the U.S and China, and the upcoming Fed meetings. Furthermore, U.S 10-year Treasury yield, climbed above 3% for the first time since 2014 on growing speculation that rising inflation expectations will push Federal Reserve to hike more aggressively. The U.S Dollar index was up 2.1% over the month.
In Eurozone, the Stoxx Europe 600 Index rose 3.9% over the month and the FTSE index climbed to the highest in almost 3 months on the back of a softening British Pound and fresh earnings reports. Retailer J Sainsbury PLC shares extended a recent rally, on the news that it plans to buy Walmart’s Inc’s U.K arm, Asda. The Euro depreciated 2.0% m.o.m against the US Dollar.
The Shanghai Stock Exchange Composite Index was down 2.7% over the month, while the Hang Seng China Enterprises Index and the Hang Seng Index gained 2.8% and 2.4% respectively. The market volatility continues amid growing US-China trade tensions, fanning worries of a full blown trade war that threatens global supply chain as well as business investment plans. China’s second largest telecom equipment maker, ZTE Corporation, was banned by the U.S commerce Department from buying components from American firms for 7 years following a violation of an agreement. The Renminbi depreciated 0.9% m.o.m against the U.S. Dollar.
The South Korean market grew 2.8% this month, outperforming the MSCI Asia ex-Japan index. Equities advanced on solid earnings momentum from the Tech sector and after North Korea pledged denuclearisation during the inter Korea summit, ahead of the upcoming summit between Kim Jong Un and U.S President Donald Trump. Meanwhile in Taiwan, the index declined 2.3% over the month, while its currency depreciated 1.7% against the US Dollar. The underperformance was mainly led by the local tech sector as Apple supply chain names posted poor results.
STI jumped 5.4% m.o.m to 3,614 points in April, a 10-year record. Most sectors were in the green with financials and consumer discretionary leading the pack with +10.4% m.o.m and +7.5% m.o.m respectively. The three big banks jumped by 8-12% m.o.m. However, staples and real estate were the laggards. The Singapore Dollar depreciated by 1.1% against the USD.
The KLCI closed flattish at +0.4% m.o.m. Investors remained cautious ahead of the 14th General Election scheduled for May 9. However, foreigners turned net buyers after having been net sellers in March. MYR depreciated 1.5% m.o.m while 10Y MGS rose 19bps to 4.13%. Consumer staples (BAT and Nestle) led while telcos (Axiata led) underperformed. MyHSR Corp has appointed the MRCB-Gamuda consortium and Syarikat Pembenaan YTL Sdn Bhd – TH Properties Sdn Bhd consortium as its project delivery partner for the KL-SG HSR civil works portion.
In Thailand, the SET index closed +0.2% m.o.m. THB depreciated by 1.3% in April and foreign investment outflow mounted further to USD680 million (already USD2.5 billion YTD). Chinese e-commerce giant Alibaba will inject THB11 billion into the first stage of the Eastern Economic Corridor (EEC) and will set up its facility and use its technology to process logistics data, with the expectation of serving shipments between Thailand and China, as well as border trade with CLMV countries (Cambodia, Laos, Myanmar and Vietnam).
The Jakarta Composite Index slid 3.1% m.o.m in April. Industrials, utilities and financials led the market lower, while telecom and materials booked small gains. Rupiah depreciated 1.1% m.o.m. Flows have been negative for 11 of the last 12 months, with net outflow of USD709 million in April (YTD outflows at USD2.4 billion). 10Y government bond yield increased by 24bps to 6.92%. Moody’s Investors Service upgraded Government of Indonesia’s long-term issuer and senior unsecured ratings to Baa2 from Baa3, with outlook changed from stable to positive.
The PSEi declined 2% m.o.m. Towards the end of the month, S&P upgraded Philippine’s credit rating outlook to positive BBB. This offered some relief to the PSEi which fell to a one-year low of 7,557 during the month. Consumer and banks led the decline in April. On the other hand, industrials and utilities were most resilient.
The Vietnam market corrected in April, after seven consecutive months of advances. The VN-Index slid10.6% m.o.m. As at end April, the index was down 13.0% from the peak, but still +7% YTD. Government bond yield bounced upward in April with 14-58 bps increases across. Headline CPI rose +0.1% m.o.m, +2.8% y.o.y with core inflation inched up 0.05% m.o.m, 1.3% y.o.y. The VND appreciated 0.15% against USD in the month. Techcombank to price Vietnam’s biggest IPO at top end, raising USD922 mil. Its listing on Ho Chi Minh City Stock Exchange is scheduled to take place on June 4.
Crude oil price (WTI) was up 5.6% to USD68.57 over the month, while Brent crude gained 7.0% to USD75.17. Oil prices gained as risk of renewed U.S sanctions on Iran, plunging Venezuelan output, and robust global demand shook off the effects of a strong dollar. Gold price fell by 0.76% over the month to USD1315/oz. Average Crude palm oil (CPO) prices marginally fell 0.35% m.o.m in April to RM2,418/MT.
Although the market continues to be supported by strong first quarter corporate earnings and easing tensions in the Korean Peninsula, we are still cautious about the market outlook amid a simmering US-China trade dispute and concerns about rising interest rate in the US. As we never fully invest at all times, we may seek to trim our equity exposure on stocks which have rallied beyond their fundamentals. The ensuing market volatilities may bring about investment opportunities. We will continue to invest in quality stocks that have strong foreseeable earnings growth, low gearing position and reasonable valuation.
|Disclaimer : Information herein has been obtained from and is based upon sources Pheim Unit Trusts 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’ 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.|