Monthly Review

Dear Investor,

Market Review

In October 2019, the MSCI Far East ex-Japan Index gained 4.53%, outperforming the MSCI World Index which was up by 2.45%.

The Dow Jones Industrial Average Index (DJIA) was up 0.48% over the month, while the S&P 500 index gained 2.04% and the Nasdaq Composite Index rallied 3.66%. The US Dollar index was down 2.04% in October. US Stocks notched significant gains after US and China resumed talks and tariffs which were to have come into effect in October were put off.  That helped ease trade tensions. The market climb further on strong earnings reports from US companies and a potential Brexit-deal. The Fed announced the third rate cut of the year and signalled it would be a while before the central bank hikes rates further.

In the Eurozone, the Stoxx Europe 600 Index was up 0.92%. Sentiment was lifted by signs of progress in US-China trade relations and hopes of a Brexit deal helped investors look past weak economic data.          

The China A-shares were up 1.89%, while the Hang Seng Index saw further recovery of 3.12%. The Hong Kong market continued its uptrend despite deteriorating domestic macro outlook, mainly supported by relaxation on the residential mortgage LTV ratio and easing of macro uncertainty with possible trade truce between US and China.    

The South Korean market gained 0.99%. The market recovery came amid improving sentiment in the tech sector and easing macro uncertainty. Healthcare was the best performing sector (+6.2% m.o.m) on the back of encouraging earnings.

Meanwhile in Taiwan, the index rallied 4.89%. Market sentiment improved amid optimism on Tech sector outlook and progress on the US-China trade deal. The tech sector was fuelled by strong earnings and 4Q guidance in major tech names. TSMC’s share price recorded new all-time high on the back of high expectations of strong revenue growth in 2020 and 2021.      

Singapore’s STI gained 3.52% in October. O&G (+15.7%) were the best performing sector followed by Utilities (+10.1%). O&G player, Keppel Corp was the best performing stock (+15.7%), driven by news of Temasek’s partial offer for the company.

Malaysia’s KLCI rebounded 0.89%. The market started the month on a weak note but rebounded post the 2020 budget announcement. Key highlights in Budget 2020 were proposal to raise minimum wage to RM1,200/month in major cities, wage incentives for workers and hiring incentives for employers, lowering the threshold on high rise property prices for foreign buyers to RM600k from RM1 mil, introducing a new taxable income band of RM2 mil at a rate of 30% and lowering the number of special draw days for NFO (Numbers Forecast Operators).   

In Thailand, the SET index dropped 2.18%, while the Thai Baht appreciated by 1.38% against the USD. Thailand was the worst performing market in October on the back of disappointing 3Q19 GDP growth rate of +2.90% which has raised concern on earnings outlook in 4Q19 and 2020.   

The Jakarta Composite Index (‘JCI’) was up 0.96%. Consumer prices were up 3.10% y.o.y in October compared to 3.40% y.o.y in September. Telecommunications was the best performing sector (+0.8% m.o.m), led by Indosat (+16.5%).    

In the Philippines, the PSEi was up 2.55%. Banks share prices have moved positively following the favourable Bangko Sentral ng Pilipinas (BSP) policy on the recent cuts for bank’s reserve requirement ratios. The BSP announced in October a 100 bps cut in RRR effective from December 2019. This will bring down the country’s RRR to 14%. 

Vietnam’s VN-Index was up 0.23% over the month. Consumer Service (+3.6%) was the best performing sector, led by Vietjet (+5.3%) and Phu Nhuan Jewelry (+3.6%). 

Crude oil price (WTI) was up 0.20% to USD54.18 per barrel in October, while Brent crude declined 0.90% to USD60.27 per barrel. Oil price trended up in the middle of the month on expectations that OPEC might consider production cuts at the upcoming December meeting, but the gains were pared down towards month end due to increase in supply. Crude palm oil (CPO) prices rallied 17.61% to RM2,444/MT in October.

The market reacted positively to the prospect of progress being made in the US- China trade negotiations. In the short term, we are cautiously optimistic of the markets.  However, we are still mindful of the uncertainties, 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 will likely remain volatile with swings in investor confidence in response to developments.

Hence, we remain cautious on the equity market outlook for 2019.  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.