Malaysia’s trading volumes were muted for the week due to a public holiday on Monday for the Hari Raya Aidilftri celebration, resulting in a
shortened trading week, said Principal Asset Management (Principal) in the recent Weekly Market Recap Report.
In Asia, most Asian markets experienced modest fluctuations throughout the week, with Taiwan and South Korean shares seeing the largest
drop in value.
For China, stocks ended with a mixed performance ahead of a five-day holiday, with Beijing’s reaffirmation of its supportive policy stance easing concerns about an uneven economic recovery.
Meanwhile, the People’s Bank of China extended its streak of seven-day reverse repurchase agreements for the 11″ consecutive day, injecting a net total of RMB 637 billion to ensure sufficient liquidity at month-end.
On another note, profits at industrial firms in China fell 21.4% from January to March from a year earlier, slightly better than the 22.9% drop recorded in the first two months of 2023.
The global financial markets largely had a mixed performance over the week. In developed markets, Europe closed with a negative return, while United States (US) and Japan recorded positive gains.
Towards the bond market, the US Treasury yields modestly decreased amid volatility ahead of the following week’s federal Reserve policy meeting, where an additional quarter-point rate hike is widely expected.
In the US, more than 50% of the companies in the S&P 500 have reported their quarter one 2023 earnings, with 80% of those beating earnings per share expectations, according to data from FactSet. However, other market data has been concerning.
On Thursday, the Commerce Department announced that gross domestic product growth in the first quarter of 2023 slowed to an annualised and seasonally adjusted rate of 1.1%, which was nearly half of what was expected.
Preliminary data released on Friday showed that the eurozone economy expanded less than expected in the first quarter of 2023, indicating a sluggish start to the year.
According to the data, gross domestic product in the region ticked up by just 0.19%, which fell short of the projected growth rate. Principal said the market narrative has been constantly changing as investors evaluate the latest economic developments.
“Despite persistent volatility, we believe that patience among investors could potentially pay off in the long run,” said Principle.
To ride through the global uncertainties, investors are recommended to consider high-quality income focus investment products. Principal’s broad strategy continues to be selective with focus on the themes of Quality, Income and Sustainability. On fixed Income, Principal’s preference remains on investment grade and that of longer duration.
“As we foresee volatility to stay elevated, we are keeping a bias for higher quality credit. We like bonds with an investment grade rating, ideally in the AA or A, and which could operate in a business that is somewhat immune to the economic cycle,” said Principle.
On equities, Principle favours quality and dividend-paying stocks for their defensive qualities that can help withstand the uncertain macroeconomic and geopolitical conditions. Principle is positive on Asia as sector earnings are poised to be rerated supported by China’s rapid reopening.
For medium to long-term exposure, Principle prefers assets that offer structural opportunities. The shift towards energy, environmental, food, and technological security is likely to be among the key long-term growth drivers in the years to come.
