Monthly review

Market Review

In December 2017, the MSCI Far East ex-Japan Index was up 2.3%, outperforming the MSCI World Index which was up 1.3%.

The Dow Jones Industrial Average Index (DJIA) was up 1.8% over the month, notching its ninth straight monthly gains. DJIA ended the year with 25.1% gain, while the S&P 500 Index gained 19.4% for the year. When dividends are included, the S&P 500 Index has posted positive returns every calendar month in 2017 — the first such streak in history. Based on the mean forecast of strategists polled by Bloomberg, the index is expected to gain 7.0% in 2018. The U.S. Dollar Index (DXY) was down 1.0% over the month. In Eurozone, the Stoxx Europe 600 Index was up 0.6% over the month and up 7.7% for the year. Euro was up 0.9% against the U.S. Dollar over the month and up 14.2% in 2017, its best performance since 2003. Europe’s tech companies have rallied 20% in 2017, making it one of the best performing sectors in the Europe, while mining stocks also had a strong year, helped in part by a late-2017 rally in metals prices.

The Shenzhen Shanghai CSI 300 Index was up 0.6% over the month and 21.8% over the year, while the Hang Seng China Enterprises Index was up 2.0% over the month and 24.6% in 2017. The Renminbi was up 1.4% against the U.S. Dollar over the month and 6.7% in 2017. The Hang Seng Index gained 2.5% over the month and 36.0% in 2017, its best annual gain in 8 years. Tencent Holdings, Hong Kong’s most valuable company, climbed 114.0% this year, contributing to about a third of the main index’s gains. China mainland investors are becoming more active investors in the Hong Kong market through the Stock Connect links.  In the first 10 months of 2017, the China mainland investors trading through the link contributed 7.2% of Hong Kong market’s average daily equity turnover, compared with an average of 4.0% in 2016 and 2.4% in 2015.

The South Korean market fell 0.4% over the month amid a move by China to restore its ban on mainland tour groups traveling to South Korea, according to South Korean newspaper JoongAng Ilbo. For the year of 2017, the KOSPI Index gained 21.8%. Meanwhile in Taiwan, the index gained only 0.8% over the month amid concerns over the lower-than-expectated new iPhones sales. Nonetheless, the index was up 15.0% in 2017, fuelled by the rally of Taiwan Semiconductor Manufacturing Company (TSMC), which was up 26.4% over the year.

According to data released by the Singapore Institute of Purchasing and Materials Management (SIPMM), Singapore’s Purchasing Managers’ Index (PMI) came in at 52.9 in November, an increase of 0.3ppts from the previous month. This is the highest level since December 2009 and the fifteenth month of consecutive expansion, coming after the index’s previous eight-year high recorded for October.

Fitch Rating upgraded Indonesia from BBB- with a positive outlook to BBB with a stable outlook, which is the highest rating Indonesia has ever achieved since 1995. Fitch said Indonesia’s resilience to external shocks is among the key rating drivers as policymakers focus on stability and it also expects Indonesia’s gross domestic product to grow 5.4% in 2018 and 5.5% in 2019, from 5.1% in 2017.

Philippines’ President Duterte signed the Tax Reform for Acceleration and Inclusion (TRAIN) bill, the first package of the Comprehensive Tax Reform Program (CTRP) which seeks to correct a number of deficiencies in the tax system and make it simpler, fairer and more efficient. The TRAIN bill will reduce the income tax rate of individual income earners, which will give them higher take-home pay. However, it will also raise duties on fuel, cars, coal and sugar-sweetened drinks.

According to Malaysia External Trade Development Corporation (MATRADE), Malaysia’s trade surplus widened to RM10.6 bil in October 2017, the highest since April 2016. Exports rose 18.9% y.o.y, snapping a two-month streak of slowing annual growth, while imports grew 20.9% y.o.y, versus the 15.2% growth posted in September. Malaysia has seen double-digit growth in exports for most of 2017, peaking at 32.5% in May.

Based on Bloomberg consensus, Thailand’s CPI inflation is likely to remain low at 1% y.o.y in December. While the GDP growth momentum has picked up in 2H17, demand-pull inflationary pressures continued to be weak. Implication on monetary policy stance is quite clear – the Bank of Thailand is likely to keep policy rates steady throughout 2018.

Despite the Vietnam market gaining only 3.61% in December, it is the best performing market among all ASEAN countries for 2017, registering a 48% y.o.y gain. This was mainly supported by strong market liquidity with foreign investments pouring into the large cap space.

Crude oil price (WTI) was up 5.3% over the month and 12.5% over the year, and closed the year at the highest level since 2015. The EIA reported a drop in U.S. oil production, with output falling by 35,000 barrel/day and crude inventories fell by a robust 4.6 mil barrels for the week ending on December 22. Gold price was up 2.2% in December amid softening U.S. Dollar. Gold price gained 13.5% in 2017. Crude palm oil (CPO) was down 2.0% over the month and down 24.1% in 2017. Exports of Malaysian palm oil products for Dec 1-20 fell 7.7%.

The global stock markets have had a good year in 2017, mainly driven by the greater sentiment in the technology sector as the mega-cap tech companies like Amazon, Alibaba, Tencent, Samsung Electronics and TSMC have rallied substantially throughout the year. While we are cautiously optimistic about the growth potential in Asia and ASEAN, we are also wary with the sustainability of the rally in this region. As we believe in not to be fully invested at all times, we may seek to trim our equity exposure on stocks which have rallied beyond their fundamentals. 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.