The MSCI Asia Pacific Ex-Japan Index (+2.3%) modestly lagged the MSCI World Index (+3.0%), mainly dragged by less-than-ideal performance in China/HK and South East Asia. Taiwan (+7.0%) and South Korea (+3.9%) were Asia Pacific’s best performers as top names such as TSMC, Hon Hai (Taiwan) and Samsung Electronics, SK Hynix (South Korea) surged double-digits on refreshed AI-driven optimism spilling to semiconductor players. On the other side of the globe, Europe (+3.7%) ended March on an all-time high as cooling inflation pressures raise investor sentiment. Malaysia (-1.0%) and Philippines (-0.6%) led to the downside as both emerging markets consolidated after an exceptional first 2 months of the year, during which Indonesian (-0.4%) markets remain subdued as potential paradigm shifts to its political landscape weigh on investor sentiment.
During the month of March, the FOMC maintained the US policy rate at 5.25-5.50% for the fifth consecutive meeting. The Fed expects to cut interest rate by 75bps this year, but the timing of the first rate cut remains uncertain. Separately, Bank of Japan hiked rates to 0% to 0.1% from -0.1%, in a historic shift marking the first time in 17 years and abolished its yield curve control policy. In China, the one-year loan prime rate (LPR) was kept at 3.45%, while the five-year LPR was unchanged at 3.95%.
The domestic market saw some profit taking in March, losing -1.0% MoM and closing at 1,536.07. In contrast, the Small Cap Index posted a positive return of +3.1%, while the Mid 70 Index gained +5.1%. Sector-wise, the top performers were Property, Construction, and Transport, with gains of +9.3%, +5.6%, and +3.6% MoM, respectively. Laggards were Telco, REITs and Industrial, declining by -2.6%, -1.2%, and -0.5% MoM, respectively. In terms of fund flow, foreign investors turned net seller in March with selling value of RM2,875.5m, bringing to YTD foreign outflows totalling RM875.1m (see Exhibit 1).
Following meetings with corporates, reassurance was provided for sequential growth in certain industrial/semiconductor sectors, driven by a record RM329.5 billion approved investments in 2023 (+23% YoY). Construction sector remains prominent, with potential projects like HSR, MRT3, and data centers sparking interest. Upstream energy sectors are favored. Investors are set to monitor government initiatives’ progress. Market adjustments expected for higher costs from subsidy removal (diesel and electricity) and new taxes (Capital Gains Tax and High-Value Goods Tax). Despite foreign selling, confidence remains due to macro blueprints’ execution, strong domestic demand, potential US dollar trend reversal, and attractive valuation.
Exhibit 1: 2024 March Market Performance
Strategy for the month
The global markets tumbled over the past trading days on stronger-than-expected US retail sales print and hotter-than-expected inflation figures which might indicate a further delay the US rate cut. The market is currently expecting a 46bps rate cut by 2024 vs 65bps earlier. Compounding to that, geopolitical tension in the Middle East has gotten hotter with the latest comment by Israel saying it has no choice but to respond to Iran’s attack. Rising geopolitical tension in the Middle East could potentially lead to sustained high oil prices and other commodity prices, which may further complicate Fed’s policy path. Having said that, our base case scenario is that we do not foresee any further escalations — especially the US (which is facing the election this November). We will keep a vigilant watch for any development in this space.
As such, we remain cautiously optimistic on global equities, with a preference for the Hong Kong/China market due to appealing valuations and policy stimulus. Additionally, the US market is favoured for its strong earnings quality, presenting opportunities for investment during any potential pullback. In Malaysia, we hold a positive view on large-cap stocks and selected small-cap stocks. Sector-wise, we have become increasingly optimistic about the Energy sector, especially upstream companies, due to the consistent momentum in earnings. Additionally, we favor the Technology sector, seeing indications of the semi down-cycle stabilising, along with companies poised to benefit from the current AI excitement. Conversely, we continue to hold our underweight stance in Telco and Plantation sectors
Exhibit 2: Selected Market Indices Valuations
Source: Bloomberg, PCM, 31 March 2024
Phillip Capital Malaysia and our offerings
We reaffirm our belief that there are still opportunities in the market, and we maintain a discerning approach in choosing high-quality stocks for our portfolio. However, it is crucial to exercise caution and carefully select investment options to ensure the best risk-adjusted returns. By taking a vigilant and discerning approach, investors can potentially reap the benefits of the current market opportunities while minimising risks.
A noteworthy avenue for investors seeking diversification in their portfolio is through PhillipCapital Malaysia. PhillipCapital Malaysia offers multiple private mandate services managed by professional fund managers. By leveraging PhillipCapital Malaysia’s private mandate services, investors can enhance their resiliency, optimise portfolio performance, and navigate the complexities of the market with confidence.
We also offer both conventional and Shariah-compliant options to cater to the needs of all investors. For Malaysia’s mandates, we like:
- PMART/PMA Dividend Enhanced
Our PMART Dividend Enhanced and PMA Dividend Enhanced is an income-driven portfolio focused on high dividend-yielding equities. We apply the Dog of the Dow approach, screen and select top market cap stocks to minimise risk and ensure consistent performance. The portfolio is an equal weighting portfolio which reduces concentration risk and provides similar exposure to all clients, both initially and after rebalancing. We offer both conventional and Shariah investment options to cater to the diverse needs of our investors.
Click here to learn more
- PMART/PMA ESG
Phillip Capital Malaysia offers discretionary portfolio that invests in stocks with high ESG ratings from the F4GBM and F4GBMS Indices, namely PMART and PMA ESG. There are both conventional and Shariah options available. To explore the companies in which both Conventional and Shariah ESG mandates invest, you can refer to the provided link.
- PMART/PMA Blue Chip and Opportunity
Our Blue-Chip portfolios primarily allocate our investments towards companies with large market capitalisations, while the Opportunity portfolios predominantly invest in companies with smaller market capitalisations. We also offer both conventional and Shariah-compliant options to cater to the needs of all investors.
Please click on the link to learn more or email us at cse.my@phillipcapital.com.my if you require any further information.
Disclaimer:
The information contained herein does not constitute an offer, invitation or solicitation to invest in Phillip Capital Management Sdn Bhd (“PCM”). This article has been reviewed and endorsed by the Executive Director (ED) of PCM. This article has not been reviewed by The Securities Commission Malaysia (SC). No part of this document may be circulated or reproduced without prior permission of PCM. This is not a collective investment scheme / unit trust fund. Any investment product or service offered by PCM is not obligations of, deposits in or guaranteed by PCM. Past performance is not necessarily indicative of future returns. Investments are subject to investment risks, including the possible loss of the principal amount invested. Investors should note that the value of the investment may rise as well as decline. If investors are in any doubt about any feature or nature of the investment, they should consult PCM to obtain further information including on the fees and charges involved before investing or seek other professional advice for their specific investment needs or financial situations. Whilst we have taken all reasonable care to ensure that the information contained in this publication is accurate, it does not guarantee the accuracy or completeness of this publication. Any information, opinion and views contained herein are subject to change without notice. We have not given any consideration to and have not made any investigation on your investment objectives, financial situation or your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any persons acting on such information and advice.
