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CIO Insights 1Q25: Game Changers

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We see strong momentum in utilities, consumer staples, and healthcare

US Equities 4Q24 – Positioning for Fed Pivot

<div style="text-align: justify;"><strong>Significant sectoral rotation in preparation for Fed&rsquo;s pivot. </strong>This change in the Fed&rsquo;s policy stance triggered huge shifts in portfolio positioning during 3Q24 as data from EPFR Global shows investors rotating from tech-related sectors to defensive plays and domestic cyclicals</div>
<ul>
<li style="text-align: justify;">Utilities, consumer staples, and healthcare will see strong momentum in an environment of growth moderation and falling bond yields</li>
<li style="text-align: justify;">Earnings surprise came at c.80%, driven by strong momentum in technology, consumer staples and healthcare</li>
<li style="text-align: justify;">Tech sell-down on the S&amp;P 500 presents opportunities for investors to jump onto the AI bandwagon</li>
<li style="text-align: justify;">Broadening US rally and lower yields will also underpin momentum in US small caps</li>
<li style="text-align: justify;">Investors rotate from tech-related sectors to defensive plays and domestic cyclicals</li>
</ul>
<p><span style="color: #999999;"><strong>Figure 1: US sectoral rotational in play</strong></span><br /><img src="/iwov-resources/aics/images/AICS/CIOweb/202410/CIOInsights4Q24_USFig1.jpg" alt="" width="1802" height="664" /><br /><span style="font-family: arial, helvetica, sans-serif; font-size: 10pt; color: #999999;">Source: EPFR Global, DBS</span></p>
<p>&nbsp;</p>
<div><em>Download the PDF to read the full US equities report.</em></div>
<div><em>Click&nbsp;<a href="../102024/CIOInsights4Q24.xml">here</a>&nbsp;for the full 4Q24 CIO Insights publication.</em></div>

Promising signs of recovery amid slowing momentum in Europe equities

Europe Equities 4Q24 – Slowing Momentum

<div style="text-align: justify;"><strong>Coming up short. </strong>Europe began the year on a positive note with promising signs of recovery but momentum in Europe equities has largely dissipated. Despite Eurozone GDP expanding 0.3% q/q in 2Q, soft manufacturing and industrial production numbers continue to dim the growth outlook.<br /><br />
<ul>
<li style="text-align: justify;">Opportunities remain in the IT services and healthcare sectors, as well as select luxury players</li>
<li style="text-align: justify;">Pullback in spending on autos and luxury goods continue to weigh on the consumer discretionary sector</li>
<li style="text-align: justify;">Renewables present fresh opportunities with the EU setting targets to reduce greenhouse gas emissions by at least 55% by 2030</li>
<li style="text-align: justify;">European companies, poised to benefit from the long-term trend of infrastructure development, with the EU investing EUR7bn in grants for transport projects alone</li>
</ul>
<p><span style="color: #999999;"><strong>Figure 1: Tepid consumption weigh on growth outlook<br /></strong></span><img src="/iwov-resources/aics/images/AICS/CIOweb/202410/CIOInsights4Q24_EuropeFig1.jpg" alt="" width="716" height="366" /><br /><span style="font-size: 10pt; color: #999999;">Source: LSEG Datastream, DBS</span></p>
<div><em><br /><br />Download the PDF to read the full&nbsp;Europe equities report.</em></div>
<div><em>Click&nbsp;<a href="../102024/CIOInsights4Q24.xml">here</a>&nbsp;for the full 4Q24 CIO Insights publication.</em></div>
</div>

Japan Equities 4Q24: Supportive Earnings

<p style="text-align: justify;"><strong>There and back again. </strong>The BOJ&rsquo;s surprise rate hike, resurgent recessionary fears, and a sharp unwinding of the yen carry trade sent Japan equities on a whipsaw, returning them to historic highs after briefly wiping out their gains for the year.</p>
<ul>
<li style="text-align: justify;">Semiconductor and IT services sectors, as well as financials sector will see strong momentum from BOJ normalisation</li>
<li style="text-align: justify;">Increase in defence spending presents opportunities for the heavy machinery sub-sector within industrials</li>
<li style="text-align: justify;">Current elevated uncertainties and currency volatility will weigh on risk appetites and corporate investments in the near term</li>
<li style="text-align: justify;">Full-year EPS growth is projected at 13% and 18% for 2024 and 2025 respectively, outpacing historical averages</li>
</ul>
<span style="color: #808080;"><strong>Figure 1: TOPIX valuations are below their 10Y averages</strong></span><br /><img src="/iwov-resources/aics/images/AICS/CIOweb/202410/CIOInsights4Q24_JapanFig1.jpg" alt="" /><br /><span style="color: #999999;"><span style="color: #999999;"><span style="font-size: 10pt;">Source: LSEG Datastream, DBS</span><br /><br /><br /><br /></span></span>
<div><em>Download the PDF to read the full Japan equities report.</em></div>
<div><em>Click&nbsp;<a href="../102024/CIOInsights4Q24.xml">here</a>&nbsp;for the full 4Q24 CIO Insights publication.</em></div>

Lower downside risk in Asian markets. Expect earnings recovery to underpin further upgrades to outlook.

Asia ex-Japan Equities 4Q24: Constructive Outlook

<p style="text-align: justify;">Investors have turned less cautious on Asia ex Japan equities since the start of the year, as evidenced by market returns and forecast revisions. We remain constructive on the region based on expectations of mid-teen to 20% corporate earnings growth, reasonable valuations, and relatively light investor positioning.</p>
<ul>
<li style="text-align: justify;">A weaker dollar from Fed easing will be supportive of Asia equities</li>
<li style="text-align: justify;">Earnings recovery lead to further upgrades in the region</li>
<li style="text-align: justify;">Upstream technology supply chain, platform businesses, and consumption-driven sectors will see strong momentum</li>
<li style="text-align: justify;">China large cap banks and S-REITS preferred for income play</li>
</ul>
<br /><span style="color: #808080;"><strong>Figure 1: Monetary easing is supportive of Asian equities </strong></span><br /><img src="/iwov-resources/aics/images/AICS/CIOweb/202410/CIOInsights4Q24_AxJFig1.jpg" alt="" /><br /><br /><span style="background-color: #ffffff; font-size: 10pt; color: #999999;"><span style="background-color: #ffffff; font-size: 10pt; color: #999999;">Source: Bloomberg, DBS<br /><br /><br /></span></span>
<div><em>Download the PDF to read the full Asia ex-Japan equities report.</em></div>
<div><em>Click&nbsp;<a href="CIOInsights4Q24.xml">here</a>&nbsp;for the full 4Q24 CIO Insights publication.</em></div>

Quarterly House Views

Silver lining ahead given inherent fundamentals

Asia ex-Japan Equities 1Q25 - Selective Opportunities

Weak economic growth has not limited the TOPIX from hitting fresh highs

Japan Equities 1Q25 – Staying the Course

Navigate downbeat European equities as we head into 1Q25

Europe Equities 1Q25 – Slower for Longer

US outperformance expected to persist given impending taxation cuts, and fiscal and monetary policy tailwinds