FSMOne SG - Research Highlights

2022-06-21 05:30:54 Macro Research

Europe: A gloomy outlook as the Russia-Ukraine war weighs on growth

• The impact of the Russia-Ukraine war is the most apparent on the European economy, especially due to its energy dependence on Russia.

• With the supply-side damage to key resources including energy, agriculture, and metals, coupled with Europe’s relatively larger exposure to Russia and Ukraine, inflationary pressures have become worse than expected and production in Europe has seen cuts.

• As such, GDP and earnings growth have been cut. Moreover, from a bottom-up perspective, German automobiles (the largest industry in the largest EU economy) have also warned of such headwinds ahead.

• Not only has the growth outlook turned gloomy, monetary policies have also turned less accommodative with rate hikes likely beginning from July, which is much earlier than the original kick-off in 2023.

• We downgrade GDP and earnings growth, but given the sell-off of the STOXX Europe 600, based on 2024 EPS, the target price is EUR 502, which implies a reasonable upside potential of 24.7% as of 16 June 2022.

• Hence, we maintain our 3.0 stars “Attractive” rating on European equities, but caution investors of the downside risks, and recommend investors to position themselves in the other more attractive markets/sectors.

: Read the full article here
: Allianz Europe Equity Growth Select Cl AT Acc EUR/ Threadneedle (Lux) Pan European Small Cap Opportunities AE Acc EUR / Vanguard FTSE Europe Index Fund ETF Shares Open / Comment

2022-06-20 03:01:12 Macro Research

ASEAN: A Region of Reopenings and Recovery

——————————————————

• ASEAN is reopening its borders to tourism, which will be a strong boost to ASEAN GDP and employment. This in turn should support equity prices.

• ASEAN equities earnings should be supported by multiple factors, such as (i) ASEAN equities’ pro-cyclical tilt, (ii) an improving situation in China, and (iii) a sustainable earnings rebound from historical lows.

• While ASEAN central banks are expected to normalise policy quicker than expected due to rising inflation, we believe the pace of tightening in ASEAN will unlikely be as urgent as the US.

• As a whole, we remain cautiously optimistic on ASEAN equities. Valuations are marginally expensive at the moment, but multiples should look more palatable over time if our earnings forecasts materialise. Using our target P/E ratio of 16.0X, we forecast an attractive upside potential of +21% by end-2024.

: Read the full article here
: Premia Dow Jones EM ASEAN Titans 100 ETF (HKEX:2810) / Principal ASEAN Dynamic Fund Class SGD Open / Comment

2022-06-16 13:00:36 Fund Idea

PineBridge Acorns of Asia – an alternative fund to consider in the Asian balanced space

——————————————————

• While we are likely to see a moderation of global growth momentum, we believe that the global economic recovery will continue. Taking a step further, we are particularly fond of the Asia region.

• For investors with a long investment horizon, we believe that having a mixed allocation to equity and fixed income will allow them to gain access to both income and growth opportunities.

• One unique aspect of the PineBridge Acorns of Asia Balanced Fund is that it focuses on young and fast-growing Asian companies.

• Investors can consider gaining access to small-caps through an active approach as more hands-on management may be beneficial when evaluating firms with high company-specific risks.

• We also like that the fund does not take on additional risks in the fixed income space – focusing only on high credit quality SGD fixed income instruments.

: Read the full article here
: PineBridge Acorns of Asia Balanced Fund Open / Comment

2022-06-11 06:41:48 Upgrading Chinese equities: If there is ever a good time to enter China’s stock market, it is now.

——————————————————

• There has been no shortage of headwinds facing China’s economy in 2022. Despite the obvious risks, we think the sell-off in Chinese stocks could be on the cusp of a turnaround.

• We expect China to roll out more policy measures to help support the economy. In fact, the government has already been rolling out economic support measures and fighting back against plummeting confidence in recent months.

• Adding to our optimism is the fact that China is emerging from its worst Covid-19 outbreak in more than two years, with daily Covid-19 cases trending down nationwide in recent weeks.

• Moreover, we believe that investors may have been too pessimistic on the earnings outlook for Chinese companies, following a string of better-than-expected earnings results.

• The valuations of Chinese equities look attractive, with a lot of negatives already priced in. With several catalysts on the horizon, we have upgraded Chinese equities from 4.0 Stars to 4.5 Stars “Very Attractive”.

: Read the full article here Open / Comment

2022-06-07 05:14:03 Checking in on the restructuring progress of Chinese builders, or looking out for opportunities amid the downturn? This is your go-to list of updates featuring 26 developers: https://bit.ly/3Q56ITK

P/S: Bookmark this page to check back for new updates every Tuesday and Friday! Open / Comment

2022-06-06 05:01:29 Macro Research

Quick Take: Expect Fed rate hikes to be more aggressive than before

——————————————————

• As of today, the Fed has already raised interest rates by 75 bps. It has also signalled its intention to step up the pace of rate hikes and begin reducing its balance sheet in June.

• In light of the recent developments, we have raised our forecast for the Fed Funds Rate from 3.25% to 3.75% by end 2023.

• Riskier assets, such as SPACs, meme stocks and growth stocks that are richly valued but have negative earnings (e.g certain software stocks) are likely to be hit the hardest as rates rise.

• Generally speaking, higher interest rates should result in a slowdown in economic activity, which in turn produces an adverse effect on equity prices.

• In light of the more aggressive rate hikes, investors should consider increasing their exposure to value oriented equities and reduce the duration of their fixed income portfolios.

: Read the full article here Open / Comment

2022-06-03 12:07:26 Macro Research

Back to Terra Firma - Lessons to be learnt from the Luna/Terra debacle

——————————————————

• The recent demise of the Luna/Terra stablecoin pair was only the latest chapter in what has already been a especially difficult 2022 for crypto assets.

• The Luna/Terra debacle has worrying parallels to historical financial crises in traditional financial markets, and we remain cautious amidst the crypto market's reluctance to learn from the mistakes of their predecessors.

• Because of this reluctance, what should have been a black swan event will likely occur again - and with no intrinsic value, there is no support when the panic selling ensues.

• Our stance remains clear: Cryptocurrencies remain a poor investment vehicle, and do not exhibit the quality and value characteristics we like in today's inflationary environment.

• After a difficult 2022 so far, quality and value opportunities with actual fundamentals and cash flows have emerged, and investors should consider buying the dip there instead.

: Read the full article here Open / Comment

2022-06-01 11:41:48 ICYMI: The China Debate | Technology? Healthcare? Financials or Real Estate?

As China continues to grow its economy, several key sectors are set to see continued growth and demand. However, each area is not without its challenges. As new opportunities emerge, which of these sectors will come out on top? Our Research analysts will go head to head in an unfiltered behind the scenes look at how they pitch and defend their investment ideas.



Open / Comment

2022-05-31 15:22:01 ETF Idea

ETF Focus List 2022

With more than 3,000 ETFs listed on our platform, choosing the right ETF for your portfolio can be a daunting task. Our ETF Focus List zeroes in on the best-in-class ETFs from a vast number of options. Find out more about how we picked the ETFs for 2022's list!



Open / Comment

2022-05-30 03:59:06 Fund Idea

US: Value to lead the way

——————————————————

• We continue to see rotation opportunities in US Value-oriented equities and we expect Value leadership to continue as supported by i) elevated inflation, ii) rate hike cycle, iii) tighter financial conditions, and iii) undemanding relative valuation.

• Inflation headwinds and more lately, late-cycle dynamics such as slowing macro growth and moderating corporate profits, have started to materialise in the US. This necessitates a transition to a Value and defensive investing style. We recommend the JPMorgan Funds - US Value Fund.

• The fund not only provides strong value exposure but the investment strategy incorporates a Quality tilt by investing in high quality, conservative companies with relatively stable patterns of earnings at attractive valuations.

• The fund has a strong track record during periods of market weakness and economic uncertainties where it often outperformed other US Value strategies as well as its benchmark.

: Read the full article here
: JPMorgan Funds - US Value A (acc) USD Open / Comment