Monthly Review November 2021
As for October, the best performing regional indexes were Ho Chi Minh Stock Index (+7.62%), Jakarta Composite Index (+4.84%) and Straits Times Index STI (+3.61 %), while the laggards were KOSPI Index (-3.20 %), Hang Seng China Aff. Crp (-2.26%) and Shanghai SE Composite (-0.58%). Most currencies in the region strengthened against the USD. The best performing currencies were Malaysia ringgit (+1.13 %) and Indonesia Rupiah (+1.08 %).
For the month, the MSCI Far East ex-Japan Index gained 1.68%, lagging the MSCI World Index which was up 5.59%.
All major indexes in the US rose: Dow Jones Industrial Average (DJIA), S&P 500 and Nasdaq Composite gained 5.84%, 6.91% and 7.27% respectively. Risk assets continued to gain and reacted positively to the start of third quarter result season. In the US, Congress managed to avert a debt ceiling crisis, pushing the decision to a new deadline in December. US president Joe Biden made progress on his infrastructure spending proposals, announcing a framework for new legislation that appears to have the broadest support yet from across the Democrat party. US labor market data highlighted the impact of worker shortages, with wages increasing by a robust 5.5% YoY. US GDP growth of 2.0% YoY for the third quarter disappointed, hurt by a combination of negative effects from Hurricane Ida and persistent supply-side distortions.
The Stoxx Europe 600 Index gained 4.55%. Europe kicked off the distribution of the Recovery Fund. Italy and Spain are the main beneficiaries of European Union (EU) resources. In the October meeting, the European Central Bank (ECB) reiterated that it expected the current rise in inflation to be transitory. Economic growth in Europe is still suffering from a loss in momentum. This is most notable in Germany, where automotive sector weakness driven by semiconductor shortages is weighing on industrial production.
Hong Kong and China indices gained, with CSI-300 Index, Hang Seng China Enterprises Index and Hang Seng Index rising 0.87%, 2.70% and 3.26% respectively. China’s economic activities weakened. The latest composite PMI for October came in at 50.8 compared to 51.7 in September. The manufacturing index came in at 49.2, while non-manufacturing index was 52.4. Equity indices gained on short covering. In near term, the economic situations are facing strong headwinds from rising cost pressure due to higher cost of energy, liquidity crunch in the property sector and lockdown in cities due to resurgence in Covid cases.
South Korea’s KOSPI Index was down 3.20%. South Korea’s economy expanded at a slower-than-expected pace in the third quarter period due to lacklustre private consumption despite recovery in exports. The economy grew 0.3 percent in the third quarter, compared with a 0.8 percent growth QoQ in the second quarter and the corresponding figure of 1.7 percent QoQ in the first quarter, preliminary data released by the Bank of Korea showed.
Taiwan’s TWSE index gained 0.31%. Taiwan’s gross domestic product (GDP) grew 3.8% YoY in the third quarter, slowing from a 7.43% in the previous quarter. Trade data continued to be strong. September export orders came in at US$62.9bn, up 17.6% MoM and 25.7% YoY. Cumulatively, January-September export orders totaled US$482bn, up 32.4% YoY. Cabinet will come up with three measures to try to stabilize rising prices. These measures include re-starting a price stabilization task panel to crack down on price gouging, refraining from raising local power rates and energy prices and keeping domestic oil prices stable, and prioritizing state-run enterprises’ sale of commodity and building materials so that they supply first to local market at reasonable prices. Meanwhile, the Cabinet estimates Taiwan’s CPI annual growth rate this year should be no higher than 2%.
Singapore’s STI gained 3.61%. Singapore latest PMI figure remained stable at 50.8 in October, similar to the previous month. Singapore’s non-oil domestic exports (NODX) surged by 12.3% YoY in September, accelerating sharply from a 2.7% rise in the previous month, and beating market consensus of a 9.6% gain. It was the tenth straight month of increase in NODX, due to a sharp rebound in sales of non-electronic while those of electronic products continued to increase.
Malaysia’s KLCI gained 1.59%. Manufacturing PMI continued to improve in October to 52.2 from 48.1 in September. The easing of restrictions on improving Covid situation helped to spur domestic consumption and economic activities.
Thailand’s SET index gained 1.11%. Thailand’s Manufacturing PMI improved to 50.9 in October from 48.9 in the prior month. Thailand welcome fully vaccinated visitors without necessitating quarantines from at least 10 low-risk countries. The reopening of the country to foreign tourist will help to spur economic activities. Meanwhile, about 118m cumulative vaccine doses are expected to be administered by the year-end (first dose: 85%, second dose: 74%, third dose: 10%). The entire population will have had at least the second dose of COVID-19 vaccines by 2Q22.
The Jakarta Composite Index gained 4.84%. Indonesia’s Manufacturing PMI increased to 57.2 in October from 52.2 in September. Industry loan growth grew by +2.1% YoY in September, 2021 (August 2021: +1.16% YoY). Demand for credit strengthened, especially from the business sector and consumption activities, according to Bank Indonesia (BI). BI maintained the 2021 GDP projection (3.5%-4.3%) and inflation target range (2%-4%). Higher commodity prices and strong global demand supported the trade balance surplus.
The Philippines PSE index gained 1.46%. October manufacturing PMI dropped to 51.0 from 52.9 in the previous month. The Philippines Central Bank (BSP) continued to stress that raising rates may be premature, considering the Philippine economy’s recovery is just starting to take hold. Money sent home by overseas Filipino workers (OFWs) rose 5.1% YoY to $2.609 billion in August, the seventh straight month of increase as more host economies with high vaccination rates reopened. For the first eight months of 2021, total cash remittances were up 5.7% YoY to $20.38 billion from $19.285 billion recorded in the same period last year.
Vietnam’s VN-Index gained 7.62%. Manufacturing PMI recovered strongly to 52.1 in October from 40.2 in September after the Covid restrictions eased. 60% of companies in Ho Chi Minh City have resumed production since the lockdown was lifted. Prime Minister Phạm Minh Chính has presented to the National Assembly a draft socio-economic development plan for 2022 which aims for a GDP growth of about 6-6.5% in 2022. The Government’s socio-economic development plan for next year sets forth 16 key targets regarding the economy, social affairs and the environment, including keeping CPI growth at around 4% and State budget overspending over GDP at 4%. The message improved investors’ sentiment.
We remain cautiously optimistics on risk assets on positive earnings in the near term supported by resilent economic growth prospect across the globe. USA policy responses are expected to remain expansionary at least for 2021, in our opinion. In Asia, the focus is on China’s policy responses to the liquidity crunch in the property sector. It is reported that mortgage rates in selective cities have started to moderate, and certain local banks have started to accelerate their mortgage approvals and grant of payments.
Headwind for risk assets include rising bond yields and continuing inflation concerns from loose monetary policies and relatively high commodity prices, as well as historically high global market valuations. The geo-political issues between China and US will keep risk premium elevated at times and result in markets volatility.
We continue to take profit on selected investment on high valuation and maintaining relatively high cash level. 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 are also in the midst of developing a robust ESG investment framework to meet the increasingly socially-aware demands of investors, as well as other stakeholders.
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.
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