January, 2021
Investors entered 2021 in risk-on mode. There was much to cheer about with the strong momentum in global growth in the latter part of 2020 carrying over into the new year; optimism that a US Democratic sweep of the White House, Congress and Senate bodes well for a fiscal stimulus boost to prevent the US economy from stalling; vaccine rollouts across the world gained traction albeit with some hiccups; and the US Federal Reserve pledged to maintain its quantitative easing programme until substantial progress had been achieved on its employment and inflation goals. However, the equity gains were pared back considerably in the final week of January as profit-taking set in.
The portfolio underperformed in January with country allocation effects offsetting positive stock selection. Whilst our Korean and Taiwanese names performed well, our overweight in India and underweight in China weighed on relative returns. Financials SBI Cards and Hong Kong Exchanges added value while Li Ning ran into some profit taking after a strong run.
All the well-worn arguments about low interest rates, the Fed ‘put’, continuing liquidity injection, US dollar weakness and vaccine rollouts have propelled stock prices higher. Yet, I think this environment requires a degree of prudence. This is a liquiditydriven bull market which central banks might not derail. However, could this wild exuberance lead to a financial accident? The almost parabolic rise in stocks fuelled by leveraged option buying, which, in many cases, is pure speculation rather than grounded on sound cash flow expectations, is not a healthy situation. I would prefer to stand back and allow sentiment and overbought conditions to moderate.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/165767477-1.pdfDecember, 2020
Asian equities ended the year on a high note after a roller-coaster year which saw global equity markets plunge in March as the world came to grips with the Covid-19 pandemic, and then stage a spectacular rebound as governments and central banks took aggressive fiscal and monetary policies to prevent a large scale collapse of businesses and tightening of credit conditions. While the pandemic rages on, the emergency approval of a few Covid-19 vaccines have given hope that there is light at the end of the tunnel. But the US and Europe, and even parts of Asia which had previously managed to contain the outbreak during the first wave, are now grappling with a resurgence in cases with infection rates and the death toll remaining high.
The portfolio performed well over the month with our consumer discretionary names the main driver of relative returns. Here, our underweight in Alibaba was helpful. The regulatory clampdown here clearly indicates a changed approach to large dominant technology platforms. This government-imposed oversight could lead to lower-than-expected returns on capital and act as a dampener on valuations. On the negative side, India’s Manappuram Finance was the main laggard. The portfolio has a sizeable allocation to India. A collapse in domestic demand combined with lower oil prices means a current account surplus in India after nearly two decades. India has witnessed much lower interest rates thanks to capital flows into Asia in general. Both those factors drive liquidity into financial assets.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/163945677.pdfNovember, 2020
Asian equities soared higher in November in line with the US and European markets. Investors were buoyed by news that vaccines being should be rolled out earlier than expected.
Investors looked past the renewed surges of Covid-19 infections in the US and Europe and fears that the fragile economic rebound could experience a double-dip and instead focused on the longer-term economic rebound. Indeed, bad news on the economic front is taken as good news for stock markets as the weak economic backdrop forces the hands of policy makers to keep the spigots flowing on the fiscal and monetary fronts to prop up economies. The portfolio underperformed over the month with the negative relative return largely down to sector allocation effects, namely our overweight in consumer discretionary. Although this overweight provided a drag, stock selection here was strong helping to offset weakness among some of our financials holdings.
Our underweight in Alibaba added value after the suspension of Ant Financial’s highly anticipated IPO while SBI Cards was the main laggard.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/162696173.pdfOctober, 2020
Asian equities edged marginally higher in October. Initial gains made earlier in the month on optimism of a Democratic sweep of the US Presidency, House of Representatives and Senate in the November election, which will enable a larger fiscal stimulus to prop up the pandemic-stricken economy, gave way to profit-taking amid a resurgence in Covid-19 cases in the US and across Europe and concerns over further lockdowns.
The portfolio performed broadly in line with the index over the month as modestly negative stock selection offset positive sector allocation effects. Our underweight in energy was helpful as was our significant overweight in consumer discretionary. Looking at stock selection, it was our financials, which provided the main drag. Here, SBI Cards in India was the chief source of weakness. Nevertheless, we are optimistic. In India, the opportunity for unsecured credit remains large. While events like Covid-19 have disrupted this trend, it should not derail it.
File: https://commentary.quantreports.net/wp-content/uploads/2020/12/Pendal-.pdfticker: BTA0054AU
commentary_block: Array
factsheet_url:
https://investmentcentre.moneymanagement.com.au/factsheets/mi/ltd1/pendal-asian-share
release_schedule:
fund_features:
Pendal Asian Share Fund aims to provide a return (before fees, costs and taxes) that exceeds the MSCI AC Asia ex Japan (Standard) Index (Net Dividends) in AUD over the medium to long term. This Fund is designed for investors who want the potential for long term capital growth from a concentrated portfolio of Asian shares and are prepared to accept high variability of returns.
- The Fund can invest in any sharemarket in the Asian region, excluding Japan and Australia, that offers attractive opportunities including Korea, Hong Kong, Taiwan, Singapore, China, Malaysia, Thailand, Indonesia, the Philippines, India and Vietnam.
- May hold cash and may use derivatives.
- Hold between 40 and 55 stocks.
- Foreign currency exposure generally not be hedged to the Australian dollar but JOHCM may do so from time to time.
manager_contact_details: Array
asset_class: Foreign Equity
asset_category: Asia Pacific w/o Japan
peer_benchmark: Foreign Equity - Asia ex Jap Index
broad_market_index: World Emerging Markets Index
structure: Managed Fund