Pared down performance following year end high
2023 global market performance was mixed and volatile but ended the year with a rally on both equities and bonds. The market rebound reflected the shift in market perspective of the US economy from recessionary risk to soft landing path, and US interest rates outlook from “higher for longer” to likely 150bps rate cut starting March 2024. The shift followed the US disinflation trend and resilient economy despite economy weakness in Eurozone and China.
However, the strong market gains from 2023-year end pared down in Jan 2024 as the market repositioned its portfolio. Market risk appetite rose on the back of lower risk reward trade off, given unattractive valuations and rising risks from geopolitical tensions and global elections. The market rally in Dec 2023 had priced in more and earlier rate cuts than supported by central banks’ cautious rates cut guidance, current resilient economy, and slower disinflation risk. Besides, the rising geopolitical tension potentially threatened disinflation trend from higher shipping and fuel cost. Looking ahead, upcoming corporate results delivery will be critical to support for further price upside. Some positive equity anecdote was TSMC’s capex expansion plan, ASML’s strong earnings, and Netflix’s higher subscription rate spurred the technology sector. Meanwhile, China market continued to decline, but with momentary uplift towards end of Jan from the surprise 50bps Reserve Requirement Ratio cut, relaxation of commercial property lending and potential USD278bn market stabilization fund.
Malaysia’s advance 4Q GDP growth estimate was disappointing largely dragged by external trade and construction growth, leading to full year 2023 growth of 3.8% YoY, lower than 4% target. Coupled with low Dec inflation at 1.5% YoY, BNM kept policy rate unchanged at 3% in Jan 24 and will remain growth supportive. BNM’s expectations of growth improvement in 2024, stemming from exports recovery, resilient domestic demand, improving tourism activity, and implementation of catalytic initiatives under the national master plans, are strong fundamental impetus to both Malaysia equity and bond market. Malaysia equity market’s positive outlook in 2024 potentially reinforced by likely weaker dollar and recovery in China market. Key investment risks for 2024 could arise from inefficiency of local policy execution, sticky inflation and US higher rates for longer.
Given PAMB’s array of funds offerings in respect to geographical coverage and investment styles, PAMB funds can ride in tandem with the global market performance. The best fund performers in 2023 were largely foreign equity funds such as PRULink Innovation Fund +50% riding on global technology stocks, PRULink Global Leaders Fund +29.76% riding on global equities, PRULink US Equity Fund +19.76% riding on US growth equities and PRUink Japan Dynamic Fund +25.36% riding on Japan recovery. For local investments, due to lackluster local equity market performance, local bond funds like PRULink Bond Fund +7.04% and PRULink Golden Bond Fund +7.24% did better than local equity funds, while the mixed asset fund type like PRULink Equity Plus Fund and PRULink Managed Plus Fund gained 6.03% and 6.93% respectively as benefited from diversification to foreign investments. Going into 2024, given our more positive outlook on Asia and bond market, we prefer PRULink Managed Plus Fund for investment diversification; PRULink Asia Growth Fund, PRULink Asia Equity Fund and PRULink Asia Managed Fund for Asia exposure.
Written by Esther Ong
Esther Ong is the Investment Market Strategist of Prudential Assurance Malaysia Berhad (PAMB).Esther is a qualified Chartered Financial Analyst as well as having obtained MSc Investment Management and BSc Insurance & Investment with a Financial Markets Association of Malaysia (Persatuan Pasaran Kewangan Malaysia or PPKM) license.
This feature is to provide general information on the current situation of the economy with the information available at the given time. This feature does not constitute investment advice and cannot be used or substituted as such. The opinions of the author may not necessarily reflect the views of Prudential Assurance Malaysia Berhad.