In February 2019, the MSCI Far East ex-Japan Index was up 2.29%, underperforming the MSCI World Index which was up 2.83%.
The Dow Jones Industrial Average Index (DJIA) moved up 3.67% over the month, while the S&P 500 index gained 2.97% and Nasdaq Composite Index rose 3.44%. US Stocks climbed after President Trump’s announcement that he would delay the planned increase in tariffs on Chinese goods. The US Dollar index was up 0.61% in February.
In the Eurozone, the Stoxx Europe 600 Index gained 3.94% over the month. US President Trump’s decision to delay the increase in tariffs on Chinese goods drove European shares to their highest since October with carmakers, most sensitive to the threat of a global trade war, leading the rally. The Euro depreciated 0.67% m.o.m against the US Dollar.
The Hang Seng Index rose 2.47% while Hang Seng China Enterprises Index rallied 3.01% in February. The equity market continued its upward trend after the strong rally in January. The Financial sector outperformed the market, driven by the rally of AIA (+11.4%) and HKEx (+10.9%) share price. Meanwhile, China market has also staged a strong rally in the month on expectation of positive outcome in US-China negotiations.
The South Korean market was down 0.43% this month. The market was disappointed that the Trump-Kim summit in Hanoi ended prematurely without producing any agreement. The Korean Won depreciated 1.19% m.o.m against the USD.
Meanwhile in Taiwan, the index gained 4.60%. Market sentiment was boosted by news that the US-China negotiations were going well and expectation of extension of deadline for tariff increase on China goods. The technology sector led the outperformance with Largan Precision rising +15.34% mo.m after reporting a surprising increase in January sales.
The STI rose 0.71% in February. The industrials and Real Estate sectors led the rise. Most of the REITS stocks chalked up gains. In the month, Singapore announced its 2019 budget, which forecasted a budget deficit of 0.7% of GDP from a surplus of 0.4% of GDP in FY2018. Singapore government’s current expenditure has risen to around 16.1% of GDP from less than 14% of GDP in 2013 on the back of increased expenditure on social and economic development.
Malaysia’s KLCI was up by 1.44%. In the month, the BNM announced that January CPI declined 0.7% y.o.y on the back of lower energy related costs. News of the talks between government and Gamuda to negotiate the acquisition of four highway concessions caused Gamuda’s share price to tumble 13% to as low as RM2.64. It closed at RM2.94 at the end of the month.
In Thailand, the SET index gained 0.72% in February. CPI came in at 0.73% y.o.y in February leaving core inflation growing at 0.6% y.o.y. January trade balance recorded a surplus of USD0.1 billion compared to a USD2.5 billion surplus in December. The Thai Baht depreciated by 1.13% against the USD.
The Jakarta Composite Index (‘JCI’) was down by 1.37% during the month. The January trade deficit widened to USD1.2 billion while February inflation was up 2.60% y.o.y. Biodiesel came into focus in the debate between the two Presidential candidates, Joko Widodo and Prabowo Subianto. Touting the government’s 98% achievement of the current B20 mandate, Widodo also mentioned that the government was working towards a B100 plan that would involve the production of fuel oil made 100% from palm biodiesel. While agreeing on the importance of bioenergy for energy self- sufficiency, Subianto outlined his strategy to fully utilize palm oil, palm sugar, cassava, as well as ethanol from sugar to achieve energy self- sufficiency.
In the Philippines, the PSEi was down 3.77%. Several banks booked higher credit costs in the quarter, triggering concerns of deteriorating asset quality. Shares of the Big 3 banks (BPI, BDO and MBT) saw significant declines of 5.5% to 8.4% over the month. The inflation rate eased to 4.4% in January and, as a result, the central bank lowered 2019 inflation forecast to 3.07% to 3.18%.
Vietnam’s VN-Index gained 6.02% in February. All sectors posted gains, with Healthcare, Real Estate, Utilities and Materials stocks posting the largest gains. Headline inflation headed up (+0.8% m.o.m) on strong consumption during the Lunar holidays.
Crude oil price (WTI) gained 6.38% to USD57.22 per barrel in February, while Brent crude also rallied 6.69% to USD66.03 per barrel. OPEC continued to talk up output cuts with the Saudis and Russia both apparently willing to produce less than required by their agreement. Average Crude palm oil (CPO) prices remained at RM2,132.22/MT, 0.07% higher compared to RM2,130.82/MT in January.
Expectation of the US and China achieving some form of trade deal and President Trump’s decision to delay the planned increase in tariff hike, coupled with the US Fed’s dovish stance on future rate hikes, has calmed investors’ worries over the economic outlook. However, the outcome of the US-China negotiations remains uncertain, and the emerging rivalry between the US and China would be a source of continuing uncertainties. Continuation of the market rally seen so far this year would have to be supported by improvement in earnings which remains to be seen.
Hence, we remain cautious on the equity market outlook for 2019 but we think that the market uncertainties and the attendant volatilities would provide us an opportunity 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.|