The MSCI Asia Pacific Ex-Japan Index (+0.3%) stagnated in April but notedly outperformed the MSCI World Index (-3.9%) as major markets such as US (-4.2%) and Japan (-4.9%) retreated after posting strong gains earlier in the year. Hong Kong (+7.4%) was the top performer for the month of April as a string of corporate earnings surprises coupled with positive policy changes lifted the index into bull market territory. Malaysia (+2.6%) picked up momentum after March’s pullback and is currently one of the strongest performing markets globally with a YTD performance of +8.3%. Singapore (+2.1%) also did well driven by strong gains amongst its top banks. Philippines (-2.9%) was the worst performer in the region followed by South Korea (-2.0%) despite positive inflation and export data. Indonesia (-0.7%) also took a breather after reaching all-time highs last month (see Exhibit 1).
Exhibit 1: Market Performance April 2024
Source: Bloomberg, PCM, 30 April 2024
Geopolitical tensions between Israel and Iran have abated quickly with the latter choosing not to escalate the situation further, providing some breathing space for a recovery towards the end of the month. Separately, China Securities Regulatory Commission unveiled a series of market reforms aimed at enhancing Hong Kong’s status as a financial hub by relaxing criteria of eligible ETFs, adding RMB Counters and including qualified REITs on Stock Connect. Additionally, China and the US reached a 5-point consensus during talks between Wang Yi (Chinese foreign minister) and Antony Blinken (US Secretary of State), focusing on stabilizing relations, enhancing exchanges, and addressing key issues (maritime affairs, people exchange etc).
The domestic market staged a strong rebound in April, gaining +2.6% MoM and closing at 1,575.97. Similarly, the Small Cap Index posted a positive return of +3.4%, while the Mid 70 Index gained +2.4%. Sector-wise, the top performers were Utilities, Healthcare, and Industrial, with gains of +7.3%, +6.4%, and +5.3% MoM, respectively. Laggards were Finance and Construction, declining by -0.3% and -0.3% MoM, respectively. In terms of fund flow, foreign investors remained net seller in April with selling value of RM1,374.1m, bringing to YTD foreign outflows totalling RM2,249.3m. Foreign investors were net sellers of Financials, Consumer and Industrial in April. In contrast, foreign investors net bought Healthcare, Utilities and Telco.
We see possible profit taking activities in the near term as investors brace for the adage of ‘sell in May and go away’. Historically, May has shown weakness for the KLCI, with an average return of -1.35% over the past 10 years and -0.68% over the past 20 years. In the last decade, only 3 years had positive returns, while 8 out of the past 20 years were positive. That being noted, any positive shift in foreign funds flow in the near term, especially considering the weak RM (vs USD), improved political stability and the undemanding valuation of 13.1x CY24 P/E (vs 10Y average of 17.4x), might catalyze an upward movement in the KLCI in the coming months.
Strategy for the month
U.S. markets are currently testing new highs, as the recent inflation report has reignited hopes for early rate cuts. The market is now anticipating the first rate cut in September, a view we concur. China play is still valid as the sentiment is supported by govt’s pledge to support property sector. There is also the potential for a mean revaluation trade based on the China market’s undoubtedly ultra-depressed valuations. MSCI Hong Kong has underperformed MSCI China in the recent rally in China off the bottom reached earlier this year. Any hint that a Fed easing cycle is about to commence would cause Hong Kong to play catch up quickly. Having said that, investors will watch the latest developments in the Hamas Israeli conflict, Iran Israel tension, the Russia-Ukraine conflict, global inflation trends, US 10-year bond yields, global growth projections, and worldwide interest rate trajectories.
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 turned positive in Consumer sector driven by rising disposable income as a result of EPF Account 3 withdrawals. 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, 30 April 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.
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- 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.
