Phillip Fund Focus December 2024

With Trump’s 2024 trade policies are expected to mirror his “America First” approach, aiming to reduce the US trade deficit, protect American jobs, and challenge perceived unfair trade practices, particularly with China. Proposed measures include blanket import duties and a 60% tariff on Chinese goods, likely provoking retaliatory tariffs and raising import costs. This could lead to higher prices for US consumers and reduced demand, slowing global trade. In contrast, Malaysia has benefitted from the US-China trade war, with re-exports growing and foreign direct investment (FDI) surging, especially in sectors like electronics, semiconductors, and green technology. Our outlook on global equities remains cautiously optimistic. We favour US equities due to strong corporate earnings and positive economic data. Trump’s proposed corporate tax cut to 15% could further enhance earnings potential for US companies, providing additional support to the market. As we approach the tail end of 2024, we anticipate continued market volatility. In this environment, we are maintaining a cautious approach to sector and theme selection, particularly in areas where valuations appear stretched relative to fundamentals.

Phillip Fund Focus November 2024

Trump’s return for a second presidential term, investors should now shift their focus to how to strategically
position themselves moving forward. We argue that market performance does not necessarily depend on the outcome of the U.S. presidential election. Notably, “Change Election” has become the new norm in the U.S. Since 2000, 10 out of 12 federal elections—including all of the last five—have led to a change in the party controlling the House, Senate, and/or the White House. This trend significantly exceeds the average from the 1960s to the 1990s, during which only one or two elections per decade resulted in a shift in party control. Despite this, the S&P 500 index has historically returned about 10% per year on average before adjusting for inflation, although the market tends to be more volatile during election years.

Phillip Fund Focus October 2024

Chinese equities had a good run in September but the rally in Chinese markets lost momentum when trading resumed following a week-long holiday, as a briefing from the National Development and Reform Commission offered limited information on additional stimulus measures. For a more sustained recovery, we believe policymakers need to actively leverage fiscal policies and implement strategies to purchase excess housing inventory more decisively. In addition to that, the country must still tackle structural issues through both substantial fiscal measures and reforms. An upward revision of earnings is also a catalyst that is still on the horizon.

Phillip Fund Focus September 2024

The market is expecting a Federal Reserve rate cut in September and is pricing in 75bps to 100bps rate cut by year-end. Additionally, we will keep an eye on US election developments, as elevated uncertainty leading up to the November election and unexpected campaign events in late 3Q and 4Q could create market volatility, impacting sector positioning and security selection. In the long term, we believe the US market remains strong, supported by the resilience of corporate earnings. Additionally, the deeply discounted valuations in the Chinese market present potential for a mean reversion trade.

Phillip Fund Focus August 2024

The MSCI Asia Pacific Ex-Japan Index (-0.2%) remained flat in July, dragged by weak performance in key markets while the MSCI World Index (+1.7%) raced ahead. India (+3.9%) advanced further, continuing its post-election rally and bolstered by investor confidence as 70% of urban Indians are positive on the national trajectory according to a survey by Ipsos. Singapore (+3.5%) came in at a strong second as banking and telco stocks registered strong single-digit gains during the month. Philippines (+3.2%) on the other hand experienced a much-needed reversal, breaking a four-month streak of consecutive losses as property sector stocks posted double-digit gains. Taiwan (-3.6%) cooled off in July after a spectacular 8.8% rally in June, amidst reports that the United States was considering tighter curbs on exports of advanced chips to China. Hong Kong (-2.1%) slid further down as investors remained skeptical on a market revival following China Third Plenum in mid-July. Japan (-1.2%) pulled back slightly as rate expectations in the US fuelled a tactical rotation into US growth stocks and small cap equities.

Phillip Fund Focus July 2024

The US market has been reaching new highs since May 2024, driven by renewed hopes for early rate cuts following the latest inflation report. The market is now expecting the first rate cut in September, a view we agree with. China market remains attractive, buoyed by the government commitment to supporting the property sector. There is also potential for a mean revaluation trade, given China’s ultra-depressed valuations. The recent correction presents a trading opportunity. Investors are closely monitoring the latest developments in the HamasIsraeli conflict, Iran-Israel tension, the Russia-Ukraine conflict, global inflation trends, US 10-year bond yields, global growth projections, worldwide interest rate trajectories, as well as major elections (in France, UK, US, etc). We remain cautiously optimistic on global equities, favoring Hong Kong/China for valuations and the US for strong earnings quality.