Weekly Market Update - 20 April 2015

Market Outlook

EQUITY MARKET OUTLOOK

• Global economic recovery is gaining steady traction.
• We expect equity markets to be supported by abundant liquidity due to ongoing global monetary easing.
• We remain positive on the local market.
• Local market may trade sideways for the next few months. We expect current market condition to be very conducive for our fund performance.
• We continue to adopt a bottom-up stock-picking strategy for our funds.

Hong Kong market outlook

• The weekend saw dramatic policy moves; at first, the China Securities Regulatory Commission’s (CRSC) cautious announcement on tightening margin financing through umbrella trusts and increase of eligible stocks for shorting sell caused wide-spread concern, reflected in the sharp plunge of SGX FTSE China A50 Index Futures in Singapore; but it was later clarified by the regulator to avoid likely panic and over-interpretation. On Sunday, the People’s Bank of China announced a 100 basis points cut to its Reserve-Requirement Ratio (RRR), a scale not seen since end-2008, which further demonstrates policymakers’ determination in fending against growth slowdown.
• We therefore remain confident on H-shares’ long-term prosperous outlook, as changes in policy within the 2 days reflects the regulators’ support for the stock market, with the preference of market rally in a slower pace. We continue to view any sell-down as buying opportunity.

FIXED INCOME OUTLOOK

• Secondary market was relatively quiet last week as Government's US Dollar (USD) Sukuk was the main focus. For corporate space, interest was seen on higher quality papers, AAA-rated and Government Guaranteed (GG) papers. For GGs, DanaInfra Nasional Berhad bonds were heavily traded over the past one week. Plus Berhad and Telekom Berhad were among top traded bonds in corporate segment.
• The newly issued government 10-year and 30-year USD Sukuk garnered impressive demand with Bid-To-Cover (BTC) ratio at 7x and 6x respectively, which is higher than the first quarter Bid-To-Cover (BTC) ratio of 3x in USD Sukuk space. The new issuance of 5.5-year Malaysian Government Securities (MGS) saw a modest BTC ratio of 1.78x, lower than the previous issuances. Since the beginning of 2015, investors have shifted interest to Government Investment Issue (GII) for yield pickup and due to improved liquidity.

Source: Lipper
 

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