Market Review December 2024
Risk assets’ performance diverged significantly in November 2024, favouring the US markets, which gained on optimism about the economic growth outlook driven by potential expansionary policies from the incoming administration under President-elect Trump. Propelled by the US markets, the MSCI World Index increased by 4.47%. The Far East ex-Japan index underperformed, declining by 4.15%. Among the Far East ex-Japan markets, ASEAN equities fared relatively better (-2.22%). Singapore shares (+5.07%) were the top performers in November, while the laggards were the Philippines (-7.41%) and Indonesia (-6.07%). Regional currencies weakened against the USD. The best-performing currencies were the Vietnamese Dong (-0.26%), Philippine Peso (-0.86%), and Indonesian Rupiah (-0.94%), whereas the weaker ones included the Malaysian Ringgit (-1.53%) and Taiwan NT (-1.49%).
Major US indices rose as investors reacted positively to Trump’s election as the next US President. The strength of the USD and the high interest rate scenario for longer durations drove fund flows back into risk assets from fixed-income asset classes. The US economy remained resilient, with the Dow Jones Industrial Average (DJIA), S&P 500, and Nasdaq Composite Index gaining 7.54%, 5.73%, and 6.21%, respectively. The US composite Purchasing Managers’ Index (PMI) was firm at 54.9 in November, up from 54.1 in October, suggesting overall activity continued to expand. The manufacturing PMI improved to 49.7 from 48.5 a month earlier, although it still indicated contracting factory activity.
The Stoxx Europe 600 Index rose by 0.96%. In the eurozone, economic data continued to point to weakness, with the composite PMI falling to a 10-month low of 48.3, indicating contractions in both the services and manufacturing sectors. The euro area annual inflation rate rose to 2.3% in November 2024, up from 2.0% in October.
Hong Kong and H-share indices declined on profit-taking as the market reassessed the impact of economic support measures introduced in late September. The Hang Seng Index and Hang Seng China Enterprises Index corrected by 4.40% and 4.37%, respectively. Chinese A-shares gained by 0.66%. The 12th meeting of the Standing Committee of the 14th National People’s Congress concluded in Beijing, approving the “State Council’s Proposal on Increasing the Local Government Debt Limit to Swap Existing Implicit Debts” to raise the debt limit by RMB6 trillion to improve liquidity and spur economic activity. However, new RMB loans and social financing in October fell short of the same period last year, declining by 32% and 24% year-on-year, respectively, indicating weak business confidence.
South Korea’s KOSPI Index fell by 3.92%, weighed down by a correction in Samsung Electronics’ share price due to concerns over earnings prospects. The Bank of Korea’s monetary policy board trimmed the base rate by 25 basis points, reducing it to 3%. The industrial sector showed signs of recovery in October, with the index of all-industry production rising by 2.3% year-on-year. On a month-on-month basis, industrial production fell by 0.3% in October, extending the 0.3% decline in September.
Taiwan’s TWSE Index declined by 2.44% due to profit-taking. Taiwan’s index gauging the state of the economy flashed a “yellow-red” light in October, indicating a moderately hot economy, according to the National Development Council (NDC). The composite index of economic indicators dropped by two points to 32 in October, the lowest since April. Confidence in the real estate market fell to a four-year low in September, with the real estate market confidence index dropping by 4.28 points to 100.39, the lowest since August 2020. The consumer confidence index decreased by 1.57 points to 75.49.
Singapore’s STI rose by 5.07%, buoyed by resilient banking stocks. Singapore’s economy expanded by 4.1% year-on-year in the third quarter of 2024, accelerating from 2.9% growth in the second quarter. GDP growth was primarily driven by a 6.6% gain in goods-producing industries, with manufacturing and construction sectors rising by 7.5% and 3.1%, respectively.
Malaysia’s KLCI declined by 0.47%, reflecting continued profit-taking by foreign funds and Ringgit depreciation. At its November meeting, Bank Negara Malaysia (BNM) maintained the Overnight Policy Rate (OPR) at 3.00% for the ninth consecutive time, aligning with market expectations. Key domestic factors influencing this decision included modest inflation, averaging 1.8% year-to-date, and an upbeat economic growth outlook supported by resilient domestic expenditure, increased exports, and robust investment.
Thailand’s SET Index declined by 2.63% due to profit-taking. The annual core inflation rate, excluding food and energy, remained at 0.77%, the highest since August 2023. Overall annual inflation increased to 0.83% in October from 0.61% in September but was below the expected 0.94%.
The Jakarta Composite Index fell by 6.07%, driven by foreign fund profit-taking. Indonesia’s economy grew by 4.95% year-on-year in the third quarter of 2024, slightly below market estimates of 5.0% and marking the slowest GDP growth since the third quarter of 2023. The unemployment rate dropped to 4.91% in September 2024 from 5.32% a year earlier.
The Philippines PSE Index dropped by 7.41% due to profit-taking. The Philippine GDP grew by 5.2% year-on-year in the third quarter of 2024, down from a revised 6.4% growth in the previous quarter and below market forecasts of 5.7%. This marked the slowest growth since the second quarter of 2023, with moderations in government spending (5% vs 11.9%) and fixed investments (7.5% vs 9.7%).
Vietnam’s VN-Index declined by 1.11%. The annual inflation rate in Vietnam rose to 2.89% in October 2024 from 2.63% in September, driven by higher inflation in food and catering services (4.45% vs 3.94%) and family appliances and tools (1.33% vs 1.17%). Fixed direct investment pledges, an indicator of future disbursements, increased by 1.9% year-on-year to USD 27.26 billion.
The market optimism surrounding the election of Donald Trump as the new US President, driven by the potential reflation of the world’s largest economy, has sparked a recalibration of macroeconomic variables and asset allocation decisions. The outlook for interest rates has turned less dovish, and the USD has strengthened. However, uncertainty regarding the implementation of actual policies may create significant variances against expectations, leading to heightened trading volatility.
Resilient US economic data, prospects of US interest rate cuts, and better-than-expected corporate earnings reports have so far boosted investor sentiment, pushing the US stock market to new historical highs. This has occurred despite the market’s already elevated valuations and ongoing geopolitical tensions. Any adverse changes in the trajectory of US economic growth and their consequent effects on corporate earnings could have a significant impact on the market. Additionally, an escalation of geopolitical conflicts or intensification of military confrontations in the Middle East could have major adverse effects on global markets. It remains to be seen whether the incoming Trump Administration will act as a catalyst for ending the war in Ukraine or alter the dynamics of conflicts in the Middle East.
We are closely monitoring geopolitical developments and policy directions in major economies, particularly the US under the Trump Administration and China. US economic data, including labour market and inflation metrics, alongside interest rate policy responses, will significantly influence market sentiment and liquidity. In Asia, the focus remains on the pace of China’s economic recovery, which has been weaker than anticipated. The Chinese property sector continues to face severe challenges, and any signs of stabilisation and growth in this sector would serve as a positive catalyst for China’s economy and risk assets.
The Chinese government has introduced various measures to support the economy, including a series of monetary, fiscal, and policy initiatives announced in September to stimulate investment, enhance liquidity, and restore confidence in property and financial markets. While these measures have boosted market sentiment, their long-term effectiveness remains uncertain and will be closely monitored. It may take time for these initiatives to yield tangible results. Market observers anticipate additional stimulus measures may be introduced in the future.
Despite the easing of interest rates, headwinds persist for risk assets. These include the impact of still-high interest rates on business and economic activities, uncertainties surrounding US policies post-election, historically high market valuations in the US, ongoing geopolitical tensions in Europe, the Middle East, and East Asia, as well as slower-than-expected economic growth in China. Nevertheless, in the investment space, there remains room for cautious optimism. After years of prolonged sell-offs, the depressed valuations of Chinese equities present potential upside, particularly following the recent round of significant policy changes.
We continue to apply our strategy of focusing on identifying fundamentally healthy companies with low valuations, low leverage, high growth, robust management and a strong track record, and adherence to our investment philosophy of “Never Fully Invest at All Times” which has served us well over the years.
We thank you once again for your continued faith in us, and hope to remain good stewards in our endeavour to protect and grow your capital.
This article is solely for information purposes. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. The information contained herein does not have any regard to the specific investment objectives, financial situation or particular needs of any person. Investors may wish to seek advice from a financial advisor before making any investment decision. Past performance is not indicative of future results. An investment is subject to investment risks, including the possible loss of the principal amount invested.