Although the world economy is expected to face a challenging year with global growth decelerating and inflation remaining high and the ongoing war in Ukraine, and banking strains in the US and Europe adding to the complexity, the Asia-Pacific region continues to display dynamism and resilience. The market is now anticipating an imminent change in the monetary policy of the Federal Reserve. This is also reflected in other parts of the world such as Europe and Asia, where tightening cycles are coming to an end. A weakening of the US dollar can have a positive impact for regional currencies, including those in Asia.
After a healthy consolidation which followed the initial re-opening rally, we believe Asia market is poised for sustained outperformance given attractive relative valuations, under-positioning and better earnings prospects. Most importantly, in contrast to the US and Eurozone, where there is a growing risk of recession due to aggressive monetary tightening cycles by both the Fed and the ECB, Asian countries are at a significantly lower risk of facing a recession. The ongoing recovery in China, as evidenced by the PMI data, along with a positive policy stance towards Internet and Property and potential easing of cross-strait tensions, could contribute to an overall boost in the Asian region. Not only that, the scale of China’s economy and its deep integration into global markets mean that its remarkable recovery is expected to have a positive spill-over effect on global economic recovery.
Certain investors are expressing doubts about the durability of China’s economic rebound, given the uneven recovery in various sectors as evident from the latest retail sales, investment, and industrial output statistics. We argue this is just a matter of time as many economic indicators are improving significantly. Furthermore, the clear message sent by the official is that China is committed to restoring healthy growth after the trauma of last year. There has been a pronounced pick up in secondary property market sales in tier-one and tier-two cities since Covid policies were relaxed. In addition to that, retail sales have rebounded as market demand and vitality improved. SOE reform is also an added positive factor to its recovery.
Our optimism with China also stems from its robust economic recovery, which has exceeded expectations and started the year on a positive note. In the first quarter, the country’s GDP grew by 4.5% year-on-year, surpassing the consensus estimate and recording the strongest growth in a year. The IMF projected a 5.2% growth for China in 2023, up from 3% last year. The World Bank, meanwhile, expects China’s GDP growth to rebound to 5.1% in 2023. Both are in line with China’s official growth target of 5%. Finally, we believe there is still more room to run for China market as the earnings outlook has yet to fully factor in the Chinese economy returning to a more normal growth cycle, and international investors have yet to re-engage with Chinese stocks in a comprehensive way.
We like Asia technology/software stocks as valuations look reasonably attractive after experiencing a sharp sell-off in 2022. In addition to that, we anticipate that the cycle for both logic and memory semiconductors is nearing its trough, with inventory levels peaking and capex moderating. We also go Long for China Policy Beneficiaries as we believe that supportive measures, loose monetary policies, and a more relaxed regulatory tone are on the horizon. Outside China, we see potential for investment opportunities in Thailand, which we believe will benefit from the return of Chinese tourists. Finally, we are optimistic about Korean memory manufacturers due to production cuts, which we anticipate will support memory prices, as well as increased demand for AI and related applications, which will catalyse the sector moving forward.
Our offerings: Phillip Managed Account for Retirement (PMART) and Phillip Managed Account (PMA) Unit Trust Mandates
Phillip Capital Malaysia offers a wide range of investment portfolios designed to meet your unique investment preferences and financial goals. Our investment offerings include Unit Trust Mandates that cater to investors who are interested in investing in both domestic equities and fixed income securities, as well as regional markets including Asia.
One of our offerings, the PMART UT, is a portfolio of EPF approved unit trust funds managed by award-winning fund managers. It allows investors to invest in multiple unit trust funds through a single investment and is reviewed and adjusted quarterly or as needed in response to major events. Separately, PMA UT is ideal for cash investors seeking a tailored investment solution via investment in multiple unit trust funds through a single investment. We offer both conventional and Shariah-compliant options to accommodate the preferences of all investors. We also offer both Moderate and Aggressive mandates that cater to different investors’ level of risk appetite.
Our country allocation for PMART UT and PMA UT for the month of March 2023 is as follows. We include Asia (including China/HK) in our portfolio at a weightage ranging from 30% to 50% (depending on whether it is moderate or aggressive), which we believe can aid in diversification.
- PMART UT (Conventional)
| PMART UT | Moderate | Aggressive |
| US | 3% | 3% |
| Euro | 0% | 0% |
| China/HK | 27% | 33% |
| India | 1% | 1% |
| Japan | 0% | 0% |
| Malaysia | 25% | 19% |
| Rest of Asia | 14% | 19% |
| Others | 4% | 7% |
| Bond | 16% | 8% |
| Cash | 11% | 11% |
| Total | 100% | 100% |
- PMART UT (Shariah)
| PMART UT | Moderate | Aggressive |
| US | 1% | 1% |
| Euro | 1% | 1% |
| China/HK | 18% | 25% |
| India | 4% | 4% |
| Japan | 0% | 0% |
| Malaysia | 23% | 21% |
| Rest of Asia | 18% | 19% |
| Others | 9% | 11% |
| Bond | 16% | 9% |
| Cash | 11% | 10% |
| Total | 100% | 100% |
- PMA UT (Conventional)
| Managed UT | Moderate | Aggressive |
| US | 23% | 24% |
| Euro | 4% | 6% |
| China/HK | 21% | 29% |
| India | 1% | 1% |
| Japan | 1% | 1% |
| Malaysia | 17% | 14% |
| Rest of Asia | 8% | 9% |
| Others | 2% | 1% |
| Bond | 15% | 7% |
| Cash | 8% | 8% |
| Total | 100% | 100% |
- PMA UT (Shariah)
| Managed UT | Moderate | Aggressive |
| US | 20% | 23% |
| Euro | 6% | 7% |
| China/HK | 21% | 25% |
| India | 3% | 4% |
| Japan | 1% | 1% |
| Malaysia | 12% | 9% |
| Rest of Asia | 13% | 14% |
| Others | 2% | 2% |
| Bond | 14% | 7% |
| Cash | 9% | 8% |
| Total | 100% | 100% |
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.
