18 Mar 2022

In summary

There are no guarantees in investing but investment principles such as seeking diversification is crucial to tide over challenging market conditions. digiPortfolio offers investors such portfolios driven by the views of the DBS investment team. In next week’s DBS NAV insights newsletter, we explore dollar cost averaging as an investment principle that we would advocate during choppy markets.

This article was first published in DBS NAV insights, a weekly subscription-only newsletter.

03 Mar 2022

Navigating the Russia-Ukraine crisis

The Russia-Ukraine crisis is the main topic on everyone's minds. Many questions have been raised on how the situation may evolve, and how investment portfolios should be positioned.

Here's a factsheet from DBS Chief Investment Office that will address some of the key questions surrounding the conflict.

The above is a summary of DBS CIO Perspectives report titled "Factsheet: Navigating the Russia-Ukraine crisis" published on 28 Feb 2022. The full report can be accessed through the DBS Private Bank website, under Market Insights.

This article was first published in DBS NAV insights, a weekly subscription-only newsletter.

09 Dec 2021

Navigating choppy waters – Omicron

When it comes to investing, uncertainties can have a sizeable impact on investor sentiment, which can result in short-term market volatility.

The selloffs that gripped US stock markets saw the S&P500 Index slide 2.3% last Friday (26 November) and 1.9% on Wednesday (1 December). The dips were triggered by investors coming to grips with the unknown impact of the Omicron variant of Covid-19, which was recently discovered in South Africa. While some reports cite that this variant may cause less severe illness, it may take some time to ascertain that with more data and of course, whether the existing vaccines are effective against this variant.

In the meantime, investors are naturally concerned about a rapid spread of the variant triggering new lockdown measures as well as prolonging supply-chain disruptions and keeping inflation elevated. There are also mounting inflation concerns, especially after US Federal Reserve chair Jerome Powell on Wednesday (1 December) said that he believes inflation is no longer transitionary.

Like all investment products, our digiPortfolios are not immune to turbulent market performance. That said, at the very core of our portfolios are well-diversified holdings which serve to manage risks and lower overall portfolio volatility. This is something that we have always been advocating.

On 26 November, our Comfy Crusin' (Level 3) ETF-based Global portfolio returned -1.1%, losing less than the 2.3% the S&P500 index lost. Navigating choppy periods has always been difficult for investors but core holdings like the Asia and Global digiPortfolio seeks to smoothen the ride to allow investors to stay invested for the long term and reap its rewards. Despite 2021 being a challenging year for markets, as of September, 95% of clients who invested in digiPortfolio for more than 12 months experienced positive returns. Out of this group, 40% of them enjoy double digit returns.

We remain committed to running core, diversified portfolios that hopefully proves resilient in such unforeseen market events. We understand that many investors may remain concerned about the outlook over the near term. We will continue to closely monitor the situation and adjust the portfolio allocation where needed.

05 Aug 2021

digiPortfolio: Navigating choppy waters – China

*A special market update*

In recent weeks, Chinese stocks have come under selling pressure in response to a series of policy announcements. While such episodes of regulatory tightening are not new to investors investing in China, the new regulations recently announced by the Chinese government did catch the markets by surprise, resulting in a broad-based selloff.

While we acknowledge market sentiment for Chinese equities will likely remain weak for now, we think that it is also important to properly ascertain the rationale behind these government measures. As such, would this be a case of short-term pain but long-term gains? For more details to our CIO views on Chinese equities, please refer to last week’s edition of NAV Insights (28th July) or follow the link here.

Unfortunately, our ETF digiPortfolios were not immune to this broad-based sell-off in China equity markets. In terms of asset allocation, the Global portfolio has approximately 8% exposure to China/HK equities (Comfy Crusin). For the Asia portfolio, given the nature of the mandate that China represents a large portion of the investment universe, it has approximately 18% exposure to China equities (Comfy Crusin). However, the overall portfolio impact was limited and cushioned by the diversified nature of our portfolios. For example, in the month of July, the MSCI China Index declined by approximately -13% (in SGD terms). However, over the same period, the Asia portfolio is estimated to decline by approximately -1% (Comfy Crusin). This highlights the importance of maintaining a well-diversified portfolio to manage risks and lower overall portfolio volatility – something we have always been advocating. We remain committed to running core, diversified portfolios that hopefully proves resilient in such unforeseen market events.

We understand that many investors may remain concerned about China equities over the near term. We will continue to closely monitor the situation and make adjustments to the portfolio allocation where needed.

This article was first published in DBS NAV insights, a weekly subscription-only newsletter.

18 Jan 2023

4Q22 Commentary: The Return of 60/40

Over 4Q22, both equities and fixed income markets rebounded strongly on signs of easing inflationary pressures and expectations of a less hawkish US Fed while China equities rallied following the easing of Covid-19 measures and a roll-out of economic support policies.

During the quarter, Income portfolio returned +5.1% (in USD terms) and +2.7% (in SGD terms) in addition to the income distributions, with all positions contributing positively. Top contributors were global dividend oriented equity strategies – Fidelity Global Dividend Fund and AB Low Volatility Equity Portfolio. Further, tightening of bond yields in the quarter benefited our global Fixed Income allocation – PIMCO GIS Income Fund and Allianz Global Opportunistic Bond Fund.

The portfolio continues to be invested in income-oriented mixed asset funds for its diversified income and income-oriented equities funds for higher income streams and moderate capital growth. A large portion of the portfolio is in bonds for the steady and consistent coupon streams. We estimate an underlying income stream to be over 4% p.a. supported by higher yields from fixed income and income equities.

With easing inflationary pressure, the visibility for markets looks less cloudy, however, some concerns around monetary tightening, global recession, and geopolitical risk remain. That said, this scenario is somewhat discounted by investors and our base case remains that of a mild recession in 2023.

We believe that there is a good opportunity for the market to stage a rebound albeit in a volatile fashion in 2023. Hence, we maintain a defensive yet constructive stance in - that is staying fully invested with a focus on quality.

Figures as of 31 December 2022.
The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

18 Jan 2023

4Q22 Commentary: The Return of 60/40

Over 4Q22, both equities and fixed income markets rebounded strongly on signs of easing inflationary pressures and expectations of a less hawkish US Fed while China equities rallied following the easing of Covid-19 measures and a roll-out of economic support policies.

During the quarter, 10-year US-Treasury bond yields swung from 4.2% to 3.5% on the above mentioned news. This benefited our allocation to Allianz Global Opportunistic Bond Fund, which has over 80% of its holdings in government bonds and high quality investment grade credits. In Asia, following the re-election of Xi Jinping as President at the National Party Congress, investors expected the new China government to focus its attention on improving China's economy. This lifted investor sentiment in Chinese credits, supporting our allocations to Asian credit funds. Supported by the above, the SaveUp portfolio returned +0.6% in addition to the income distributions with all positions contributing positively.

The SaveUp model portfolio characteristics are as follows. The portfolio yield-to-maturity stood at 5.2%, with a duration of 2.4 years. It has an average credit rating of A with high yield allocation below 10%, supported by our focus on quality.

With easing inflationary pressure, the visibility for markets looks less cloudy, however, some concerns around monetary tightening, global recession, and geopolitical risk remain. That said, this scenario is somewhat discounted by investors and our base case remains that of a mild recession in 2023.

We believe that there is a good opportunity for the market to stage a rebound albeit in a volatile fashion in 2023. Hence, we maintain a defensive yet constructive stance in - that is staying fully invested with a focus on quality.

Figures as of 31 December 2022.
The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

18 Jan 2023

4Q22 Commentary: The Return of 60/40

Over 4Q22, global equity and fixed income markets saw a strong rebound as moderating US CPI data spurred hopes that the worst of inflationary pressures may be behind us, giving room for the US Fed to potentially slow the pace of rate hikes. In addition, there were positive news from China as the government took swift and concrete steps in 4Q22 towards ending COVID-19 lockdown measures and reopening the country. As a result, global equities (as measured by the MSCI ACWI Index) and global fixed income (as measured by the Bloomberg Global Aggregate Total Return Index) markets rebounded by +9.8% and +4.6% respectively over 4Q22.

The Global portfolio benefited from the global market recovery and enjoyed a strong rebound as well. Our overweight allocation to equities, especially Chinese equities, did well as the China market rallied by +13.6% over the quarter on the back of reopening hopes. The allocation to gold miners also contributed positively as gold prices climbed. However, our underweight allocation to fixed income detracted as global bonds also rallied on the back of lower long-end rates and narrowing credit spreads. For the full year 2022, although the portfolios were unfortunately down in absolute returns, they held up relatively better and outperformed the general markets which were down even more.

Looking into 1Q23, we are looking to make several adjustments to the portfolios’ asset allocation. On equities, after keeping the asset class at an Overweight stance for most of 2022, we now intend to trim the allocation back to Neutral weight. Within equities, we continue to prefer US and Asian equities. On fixed income, we will upgrade the asset class to Overweight as we now see attractive risk-reward for bonds. Within fixed income, we remain focused on quality. Hence, we prefer to add to US Treasuries and short-dated Developed Market investment grade credit, while maintaining an Underweight stance on emerging market debt. On the whole, we will continue to monitor closely market risk factors such as recession concerns and adjust the portfolios accordingly. But if our view of a mild recession is realised, we think that there are good opportunities for the market to stage a rebound this year, albeit in a volatile manner.

Figures as of 31 December 2022.
The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

21 Jul 2022

3Q22 Commentary: Rising Above Inflation

Over the second quarter of 2022, high inflation and geopolitical tensions continued to lead to investor concerns over further Fed rate hikes and global growth slowdown. This resulted in a watershed quarter for risk assets with global equities (as measured by the MSCI ACWI Index) and global fixed income (as measured by the Bloomberg Global Aggregate Total Return Index) falling by -15.5% and -8.2% respectively over 2Q22 (as of 30 June 2022).

The actions taken in the beginning of the quarter to increase portfolio defensiveness contributed positively. For example, our moves to reduce Europe equities and Emerging Market corporate bonds contributed, although the increase to US equities detracted. Looking ahead, we continue to maintain a sizeable overweight position in Asian equities as we believe the risk-reward for China looks compelling. In addition, we move Japan equities to a tactical overweight as the weak Japanese Yen has made the investment case more compelling for this export-oriented market. On Fixed Income, we increased our allocation in developed market government bonds such as US Treasuries. On the other hand, we further cut exposure to emerging market bonds given the twin headwinds posed by dollar strength and expected monetary tightening in EM countries.

On the whole, barring further deterioration on the geopolitical front, we stay hopeful for a better showing of risk assets in the second half of the year. We continue to advocate investors to stay the course and maintain a well-diversified portfolio across asset classes.

The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

06 May 2022

2Q22 Commentary: Anchor in the Storm

Global Portfolio

Global equities and bonds had a turbulent 1st quarter. Investors were concerned that central banks would become overly aggressive in raising interest rates to combat rising inflation. The Russia-Ukraine war added to anxieties as disruption in energy supply caused the oil price to spike to $120. At its trough, the MSCI All Country World Index declined around 13% before rallying to end the quarter -5.4%. The hawkish Fed stance weighed on global bonds and the Bloomberg Barclays Global Aggregate Total Return Index ended the quarter -6.2%.

The weak market returns weighed heavily on our portfolios notably the bond centric ones. The economic backdrop remained strong as developed markets continued to open up. We remained invested with the view that equities prices were oversold and the sharp rise in bond yields had heavily discounted the rise in interest rates. Our CIO office had studied the impact of rising inflation during periods when economic growth remained firm on equities and determined that markets historically continued to rise during these periods. Presently, corporate earnings growth remains good albeit with some moderation. Corporate profitability also looks good, supported by stable household balance sheets and stable wages. Similarly, the negative impact on equities during major military conflicts such as the Gulf War did not last long and markets still rose on average. Over the quarter, Global Portfolio and Global Portfolio Plus (referencing the Comfy Cruisin’ risk level) returned -8.4% and -8.5% (before accounting for dividends paid) respectively.

In equities, we remain focused on growth stocks with an income tilt. We are invested in funds such as the Capital New Economy Fund that invests in global companies benefiting from secular growth trends such as Cloud Computing, E-commerce and digital transformation. We also hold the Franklin US Opportunities Fund that similarly invests in growth companies in the US. In income equities, we have the First Sentier Dividend Advantage Fund that focuses on companies with good cash flow. Asia equities has sold off leaving the underlying dividend yield attractive as dividend pay-out have been relatively stable amid the price correction.

In bonds, we maintained a defensive posture by keeping duration short of around 4.5 to 5 years, focusing the portfolio on developed markets investment grade credits. As treasury yields rose and corporate spreads widened, investment grade corporate bond yields are now at an attractive 4.5%. We continue to favour the Loomis Sayles Multisector Income Fund and the Pimco Diversified Income Fund that are focused on higher income generation strategies in developed markets. In Asia, we will continue to hold the Blackrock Asia Tiger Fund that invests mainly in Asia corporate bonds, capitalising on a recovery in Asia bonds with an attractive yield of around 6%.

Looking ahead, we expect the near-term volatility to linger as the Russia-Ukraine conflict drags on and the Fed continues to fight inflation aggressively. As long as economic growth continues on an upward trend, we expect investor concerns to subside. The DBS economics team expects inflation to peak in the second half and this should give some room for the Fed to moderate its hawkish posture. In Asia, the CIO has upgraded China on valuation grounds with a clear easing tone from the government being the catalyst. We also remain positive on US equities as the recent sell-off has improved valuation. Similarly, the CIO upgraded developed market credits as bond yields are once again attractive. We have introduced another US equities fund and a developed market bonds fund to capitalise on the attractive valuations as part of this quarter’s review.

The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

03 Feb 2022

1Q22 Commentary: A Divergent World

Global Portfolio

Global equities rallied in 4Q21 driven by bullish sentiment in developed markets. In contrast, Asia equities declined, weighed by increasing recession risks in China from regulatory tightening. The bond market was flat and struggled against the headwinds of a more hawkish Fed and the correction in China property bonds. In 4Q21, the MSCI All Country World Index rose around 6.7% while the Bloomberg Barclays Global Aggregate Total Return Index was flat.

We remained fully invested during this period with a tilt towards developed market equities. This lifted our moderate risk (“Comfy Cruisin’”) Global Portfolio Plus and Global Portfolio portfolios respectively. Our portfolios have limited exposure to Asia equities and bonds, mitigating the volatility from the China markets sell-off.

During the quarter, the standout performers in developed market equities were the BlackRock European Equity Income Fund that appreciated around 9% and the BNY Mellon Long Term Global Equity Fund that rose around 8%. The First Sentier Dividend Advantage Fund declined 0.70% although this is worth mentioning as it was relatively steady during a volatile quarter in Asia.

Our bond funds declined weighed by the market concerns. We have the Loomis Sayles Multisector Income Fund and the PIMCO Diversified Income Fund that are focused on higher income generation strategies in the developed markets. Over the year, they have performed respectably in a weak bond market. In Asia, we have the BlackRock Asia Tiger Fund that invests mainly in Asia corporate bonds which was affected by the China market sell-off. We will continue to hold this Fund for a recovery in Asia bonds as its yield around 6% looks attractive.

Looking ahead, we continue to view risk assets favourably and will maintain a tilt towards developed market equities. Following the Asia market sell-off, there is potential upside in the medium term. Near term, we expect volatility to linger until growth expectations in China stabilises and prefer to add later. Bonds will continue to face headwinds in 2022 although corporate bonds will benefit from earnings upgrades. We will maintain our focus on corporate bonds, focusing on the BBB / BB rated credit segments.

The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

03 Nov 2021

4Q21 Commentary: Stay the Course

Global Portfolios

Global equities consolidated in 3Q21 as investors took stock of the coming tapering of the Fed’s QE program. Investors were more concerned about the regulatory tightening in China in certain sectors namely tutoring, gaming and property leading to a liquidity crisis in the highly indebted property sector. Investors panicked and speculated how much more damage these measures would do to the economy. The MSCI AC World Index declined around 1.5% with the pain largely confined to Asia equities where the MSCI AC Asia ex Japan Index corrected around 10%. The global bond market was flat even as the USD Treasury yield curve steepened. The market felt comfortable that the recent inflationary headwinds were transitionary, and the Fed would pace its tightening stance. Again, the pain was felt more in Asia credits particularly in China high yield bonds because of the events described above. The JPMorgan Non-Investment Grade Total Return Index (Asia HY bonds) declined 5.7% while JPM Investment Grade Total Return Index (Asia IG bonds) rose 0.41%. During the quarter, “Comfy Cruisin’” Global Portfolio Plus USD model portfolio and Global Portfolio USD model portfolio declined slightly around 0.60% and 0.10% respectively. The portfolios held around 50% in equities, 45% in fixed income and 5% in cash. Compared to the composite returns of the Global Equities and Global Bonds indices above, the GP Plus portfolio was slightly lower while the GP Portfolio was better.

Our equities holdings did better than their respective regional indices helped by their focus on developed markets growth equities. Our funds included the Franklin US Opportunities Fund and the Capital New Economy Fund that focuses on companies with firm earnings growth. In Asia, we have the First Sentier Dividend Advantage Fund that focuses on dividend paying companies. Although its returns were negative in 3Q21, it vastly outperformed regional indices and declined around 2% compared to the MSCI Asia ex Japan Index’s 9% decline. We continue to like these funds for their sound approach in stock selection. Our developed market bonds funds also did better than regional indices helped by their focus on corporate bonds that outperformed government bonds. We held the Loomis Sayles Multisector Income Fund and the PIMCO Diversified Income Fund for their focus on higher income generation strategies. On the other hand, the negative returns in the BGF Asian Tiger Bond Fund in 3Q weighed on the bond portfolio. The Fund invests mainly in Asia corporate bonds and was affected by the sell-off in China market bonds. Nevertheless, we believe that much risk has been discounted and Asia bond yields are looking attractive now. We will continue to hold the Fund and may add to it provided that market conditions stabilise.

We see the recent pull back in equities markets as temporary and remain fully engaged. We continue to favour equities over fixed income for its better potential returns in the low bond yield environment. In equities, we are focused on growth themes where earnings visibility is the best in this changing world. Around two-thirds of our equity exposure are in growth funds while the remaining one-third are in income equities as a balance in a barbell format. We stay invested in the equities funds mentioned above. Our view of the bond market is unchanged. We continue to expect the USD Treasury yield curve to steepen gradually. This is with the view that the recent inflationary spikes were transitionary and monetary policy will gradually tighten. Our strategy is to keep duration short and focus on corporate bonds in the BBB / BB segment where risk reward is better balanced. Asia bonds look attractive especially in the BB credit segment in China where bond yields are around 8% to 11%. We will wait for conditions to stabilize before adding fresh positions in Asia. We maintain our position in the BGF Asian Tiger Bond Fund.

We will monitor events closely and adjust our strategy where needed.

The above table is based on the Indicative Model Portfolio gross of fees returns and excludes dividends received. Individual performance may vary.
YTD Returns as of 30 Sep 2021.

19 Jul 2021

3Q21 Commentary: Hope Into Reality

Global Portfolio

In 2Q21, Global Equities (referencing the MSCI AC World Index) rose 7.4%, driven by robust corporate earnings and continued liquidity support from central banks in the US and Europe. Global bonds (referencing the Bloomberg Barclays Global Aggregate Total Return Index) gained 0.98%, helped by a moderation in inflation expectations.

During the quarter, both “Comfy Cruisin’” Global Portfolio Plus USD model portfolio and Global Portfolio USD model portfolio made total returns of 4.7%. Both equities and bonds contributed positively with equities showing a larger outperformance, helped by a rebound in the growth funds.

The equity fund that stood out was the Franklin US Opportunities Fund, which invests in growth themes in the US such as semiconductors, enterprise software and healthcare. The other growth funds included in our portfolios are the BNY Mellon Global Equity Fund and the Capital Growth New Economy Fund, both with a bottom up approach to investing. In bonds, the best performer was the Loomis Sayles Multisector Income Fund, a fund which focuses on generating above average cash flows from different income sources. We also have the BGF Asia Tiger Bond Fund, an Asian focused credit fund, for yield pick-up.

The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

What’s next

Looking ahead, we continue to favour equities over fixed income.  Our equity investments continue to tilt towards growth themes where earnings visibility is the best in this changing world. We also expect the USD bond yield curve to steepen gradually.  Thus, our strategy is to keep duration short to mitigate our portfolio sensitivity to potential interest rates rises.

20 Apr 2021

2Q21 Commentary: Back On Track

Global Portfolio

In 1Q21, Global Equities (referencing the MSCI World Index) rose 4.9%, driven by an acceleration in vaccination programs and fiscal stimulus in the US. Global bonds (referencing the Bloomberg Barclays Global Aggregate Total Return Index) declined 4.5% corrected as yields rose. Our portfolios benefitted from being fully invested during this period with a tilt towards equities and -our moderate risk (“Comfy Cruisin’”) Global Portfolio Plus USD model portfolio and Global Portfolio USD model portfolio declined around 0.15% and 0.89% respectively.

Our equities holdings underperformed the 1Q21 market rally. The BNY Mellon Long Term Global Equities Fund and Franklin US Opportunities Fund, which we like for their focus on quality and growth stocks, lagged the rally driven by value stocks this year. With the strong rally in value counters, we expect investors to be more selective in their stock picking, which favours the bottom-up approach of these two funds.

Our bond funds outperformed declining global bond markets by keeping their duration short and focusing on credit, particularly in Asia. We had the BGF Asian Tiger Bond fund, which focuses on Asia corporates, and the Loomis Sayles Multisector Income Fund, that invests in corporate bonds globally. The funds’ strategies will help mitigate the drag from rising bond yields whilst maintaining above-average income streams.

digiPortfolio performance

The above table is based on the Indicative Model Portfolio gross of fees returns and excludes dividends received. Individual performance may vary.

What’s next

Looking ahead, we continue to favour risk assets and will maintain a tilt towards equities. We are watchful of the rising bond yields although we expect this to peter out eventually, as longer-term inflation still faces structural headwinds such as disruptive technologies.

19 Jan 2021

1Q21 Commentary: A New Hope

Global Portfolio

Amid the tumultuous year in 2020, the funds-based digiPortfolios have made positive gains for the full year, following on a successful 2019. We achieved this by maintaining a well-constructed portfolio and focusing on high conviction fund selections.

During 4Q20, the portfolios were fully invested and benefited from the rally in equities and corporate bonds. Some of the notable performers in equities were the Capital New Economy Global Equity Fund, a fund that focuses on growth stocks and is aligned with our DBS CIO Barbell theme. It rose around 16.5% in 4Q compared to the equity market’s 14% return. Meanwhile, the FSSA Dividend Advantage Fund rose around 20%.

Within fixed income, we maintain our favourable view on corporate bonds that we expect will drive bond market returns as the economy recovers. We continue to hold the Natixis Loomis Sayles Multisector Income Fund which rose around 6% over Q4 while the PIMCO Diversified Income Fund appreciated around 4.5%.

digiPortfolio performance

The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

What’s next

Looking ahead, we expect risk assets, namely equities and credit, to appreciate in 2021. The backdrop for risk taking is favourable – ultra easy monetary policies, less confrontational US-China politics and a viable cure for Covid-19. Heading into Q1, we are comfortable with our fund holdings and will make changes when appropriate.

06 October 2020

4Q20 Commentary: On the mend

Global Portfolio

Over the third quarter of 2020, risk assets such as equities continued to grind higher supported by policy stimulus and the progressive re-opening of major economies. Within the regions, Asian equities was the best performing market, especially China A shares, followed by US equities. This benefited the portfolio given our overweight positioning in equities which are skewed toward Asian and US equities. For fixed income, our preference for emerging market debt and corporate credit over government bonds continued to fare well as both emerging market debt and corporate bonds outperformed government bonds over the quarter.

Looking into the fourth quarter, market volatility may remain high due to near-term uncertainties as we approach the US elections. That said, we continue to advise clients to look beyond the short term. Over the medium term, we stay constructive on equities as interest rates are expected to stay low while the global economy appears to be on the mend, especially if a vaccine is successfully found. We will keep the portfolios under close scrutiny and will use available cash to seize opportunities when they occur.

The above table is based on the Indicative Model Portfolio gross of fees returns.
Individual performance may vary.

04 August 2020

3Q20 Commentary: Capitalizing on the market rebound

Global Portfolio

Over the second quarter of 2020, given unprecedented monetary support measures from central banks worldwide, global markets across many asset classes took a dramatic turn and staged a strong comeback. The USD Global digiPortfolio benefited from the market rebound and recovered strongly over the second quarter given our positioning. For instance within equities, we stayed overweight in both the US and Asia equity markets despite the March sell-off. Our fixed income allocation also paid off as we favoured corporate bonds and emerging market debt.

Within the equity space, given our constructive medium-term view on China especially the China ‘A’ share market, we decided to add new exposure to this market with the iShares MSCI China A ETF. In the fixed income space, we further reduced our government bond exposure to rotate into corporate credit and emerging market debt where we see higher yields. Looking ahead, given the strong market rebound over the second quarter, we will not be surprised should we see a near-term market consolidation. While we continue to closely monitor near-term macro uncertainties, we think central banks will likely provide support if necessary. Thus should that happen, we stand ready to take advantage of any opportunities.

The above table is based on the Indicative Model Portfolio gross of fees returns.
Individual performance may vary.

12 May 2020

2Q20 Commentary: Distancing the short term

Global Portfolio

Over the first quarter, fears over the COVID-19 pandemic coupled with crude oil price collapse led to a broad sell-off in global markets including global equities, corporate bonds and emerging market bonds. That said, government bonds led by US Treasuries rallied well which benefited the portfolio. Given the strong rebound, we decided to take some profits and tactically reduce the government bond exposure. This will be temporarily parked in cash.

Looking ahead, while markets may likely remain volatile over the near term, we do expect rationality to eventually prevail. With higher cash levels in the portfolio currently, we have the flexibility to take advantage of any market volatility to re-deploy into markets in the months ahead. In the meantime, one key lesson we have learnt through multiple market cycles is the importance of adopting a long-term portfolio approach toward investing. This is what we hope to deliver with the global ETF portfolio that is well-diversified across asset classes.

The above table is based on the Indicative Model Portfolio gross of fees returns.
Individual performance may vary.

18 Jan 2023

4Q22 Commentary: The Return of 60/40

Asian markets took a positive turn over the fourth quarter, led by China as the Chinese government swiftly rolled back Covid-19 lockdown measures and took active steps towards reopening the country. In addition, Chinese policymakers also announced a series of supportive measures for key economic sectors and reiterated the importance of supporting economic recovery. As a result, Asian equities, especially China rebounded strongly. Singapore government bonds also rallied as interest rates declined on the back of moderating inflation data.

Given our sizeable positioning in Chinese equities, the Asia portfolio benefited from the China market recovery. Singapore equities also continued to climb higher, contributing positively to performance. However, the exposure to Indian equities and REITs detracted as India saw a consolidation on rich valuations while REITs faced headwinds from higher interest rates. On fixed income, the portfolio benefited from the rally in Singapore government bonds.

Looking into 1Q23, with the constructive Zero-Covid policy pivot in China, low valuation levels and still very low global investor positioning, we believe there remains compelling upside potential for China equities and intend to increase our exposure especially to Chinese internet stocks. In turn, we will further reduce Indian equities as we see less near-term catalysts given rich valuations. On fixed income, we now see attractive risk-reward for bonds and will look to add to government bonds. On the whole, while near-term risks still remain for Asian markets which will keep equity bourses volatile, we remain constructive and expect equities to continue to recover from the lows over the next few months.

Figures as of 31 December 2022.
The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

21 Jul 2022

3Q22 Commentary: Rising Above Inflation

Over the second quarter of 2022, Asian markets started to outperform developed markets on relative terms. For example, while US equities fell by -16.1%, Asian equities (as measured by the MSCI AC Far East ex. Japan Index) fell by a much lesser extent of -8.2%. Similarly for fixed income, while global bonds (as measured by the Bloomberg Global Aggregate Total Return Index) fell by -8.3% over 2Q22, Asian bonds (as measured by the iShares J.P. Morgan Asia Credit Bond Index ETF) fell by a smaller magnitude of -6.7%. Notably, Chinese equities bucked the trend to register a positive gain of +3.5% over the quarter. This benefited the Asia ETF digiPortfolio given our overweight stance on China.

Looking ahead, we remain overweight on Chinese equities as we believe the stage is set for China to continue its outperformance over the second half of the year. We further reduced the Indian equity exposure tactically given still high valuations coupled with weak Indian Rupee, although the long-term structural outlook remains bright. Within Singapore equities, we reduced our position in the Nikko AM Singapore STI ETF given the year-to-date relative outperformance of the broad Singapore equity market and re-allocated to the NikkoAM-StraitsTrading Asia ex Japan REIT ETF. We think that the year-to-date underperformance of SG REITs suggests concerns over rate hikes and cost pressures may have been priced in by the market while dividend yields for REITs should likely stay stable. In addition, we see REITs as adding defensiveness to the portfolios in light of the current volatile market environment. For fixed income, we remain underweight on the asset class and focus on building portfolio resilience. This is done by further reducing our corporate bond exposure and re-allocating to government bonds.

On the whole, barring further deterioration on the geopolitical front, we stay hopeful for a better showing of risk assets in the second half of the year. We continue to advocate investors to stay the course and maintain a well-diversified portfolio across asset classes.

The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

06 May 2022

2Q22 Commentary: Anchor in the Storm

Asia Portfolio

Along with most developed markets, the first quarter of 2022 was a highly volatile period as Asian equities and credit fell by -7.6% and -6.2% respectively (in SGD terms). On a relative basis, the Comfy Cruisin’ portfolio held up strongly and returned -3.8% (without including dividend payouts) for the quarter. This was helped by diversifying our sources of returns.

Over Q1, the downside pressure on broader Asian equities was led by Chinese equities on several concerns. However that said, while risks certainly still remain for China equities, we see the move on 16th March 2022 by Chinese Vice Premier Liu He to announce that they will take “substantial measures” to stabilise markets as a positive. The Chinese officials stated that they will proactively work with the US on the US ADR delisting issue, look into alleviating debt issues to restore confidence in the China property sector, eliminate the current regulatory uncertainty overhang on the internet sector and gradually adjust its “covid-zero” policy to minimise economic impact. While exact details are yet to be disclosed, this is a positive as the government appears to be addressing the key concerns many international investors have on China. This is coupled with compelling valuations as Chinese equities are currently trading at their lowest in seven years. Thus, we see asymmetric risk-reward to increase our Chinese equity exposure on expectations of an eventual return to normalcy over the summer. This is funded by reducing our India equity exposure as we see reasons to be tactically prudent over the near term given the market’s strong outperformance and high valuations.

The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

09 Feb 2022

1Q22 Commentary: A Divergent World

Asia Portfolio

2021 was a year of sharp divergences among Asian markets. While our positioning in Singapore and Indian equities did well, exposure to China equities was unfortunately a drag as the Asia SGD portfolio ended the year with -4% for the Comfy Crusin’ risk profile. As the Western countries continued their path of fiscal stimulus and unconventional monetary policies, China did the exact opposite by adopting fiscal prudence and sticking to a conventional monetary policy, on top of the various regulation tightening measures carried out across sectors. Only time will tell which will be a long-term benefit to the economies. But in the short-term, this has led to a bear market in Chinese equities.

Looking into 2022, China has started to reverse its policy by reducing its RRR and cutting policy interest rates. These moves further highlight the policy divergence between China and the US as the US Federal Reserve now hints at monetary policy tightening. We expect China to stay accommodative on its policy front this year and focus on addressing rising downside GDP growth risks. This should be supportive for China equities, coupled with its compelling valuations after the deep correction in 2021. However that said, a meaningful rerating for China equities will hinge on a few factors such as a gradual tapering of regulatory tightening measures, effective solutions to address the debt situation of Chinese property developers and signs of earnings rerating for essential sectors such as e-Commerce, financials and consumer discretionary. We stay constructive on China equities but will closely monitor developments for the mentioned factors.

The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

15 Oct 2021

4Q21 Commentary: Stay the Course

Asia Portfolio

Over 3Q21, global equities and global bonds ended 3Q21 slightly weaker, weighed down by concerns of monetary stimulus winding down, regulatory tightening in China and its property sector debt woes. In 3Q21, the MSCI All Country World Index declined around 1% while the Bloomberg Barclays Global Aggregate Total Return Index was flat. Developed markets continued to outperform developing market equities, with Japan as the outperformer.

The Asia portfolio continued to see downside pressures, similarly due to the Chinese equity allocation. While market volatility may remain elevated over the near term as markets do not like uncertainties, we believe that actions taken by Chinese policymakers are timely as this will set the path for long-term inclusive growth in the world’s second largest economy. We remain hopeful as China has solid long-term economic fundamentals and its stock market has corrected to attractive GARP (Growth-At-Reasonable-Price) valuations in our view. Hence, patience is needed. That said, our allocation in Indian equities benefited the portfolio as India continued to rally strongly and remains as one of the best performing Asian market in the third quarter as well as year-to-date.

Looking ahead, we believe the Fed will remain very deliberate in communicating their intent and roadmap, and financial markets will be on stronger footing amid a continued zero-bound rate policy stance. We continue to view risk assets favourably and will maintain a tilt towards equities. Longer dated bond yields will rise further albeit moderately as the Fed has signalled its intent to wind down its QE program. We will monitor events closely and make the necessary adjustments where needed.

The above table is based on the Indicative Model Portfolio gross of fees returns and excludes dividends received. Individual performance may vary.
YTD Returns as of 30 Sep 2021.

19 July 2021

3Q21 Commentary: Hope Into Reality

Asia Portfolio

Global risk assets continued to grind higher through 2Q21, with global equities up +7.5% over the quarter. Developed market equities such as the US and Europe led gains. Bonds also rebounded as US bond yields retreated. The Asia portfolio, referencing the Comfy Cruisin’ risk level, returned +1.7% over Q2. Positions in India and China equities were key contributors with Singapore equities taking a breather after strong Q1 performance. SGD government and corporate bonds also returned positively.

Looking ahead, we see central banks gradually tapering their asset purchases while holding policy rates at zero-bound. On balance, with high levels of liquidity remaining, we believe the current environment will continue to support risk assets. Our portfolios are positioned with an overweight in equities and spread products such as credit. We stay constructive on China’s technology and new economy sectors as their long-term fundamentals are compelling and valuations look attractive given the sharp correction. This quarter, we introduce Lion-OCBC Securities Hang Seng Tech ETF which seeks to track the performance of the Hang Seng Tech Index.

The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

13 April 2021

2Q21 Commentary: Back On Track

Asia Portfolio

Asian equities on the whole initially got off to a strong start in 2021 but lost simmer over the quarter as Chinese equities corrected on concerns over potentially tighter monetary policies and the government’s ongoing regulatory measures on the Chinese internet sector. Singapore equities on the other hand, delivered around +12% thus emerging as one of the best performing Asian markets over the quarter. This panned out well for the portfolio as we made a change in the beginning of the year to reduce our Chinese equity and increase our Singapore equity exposure. Our Indian equity allocation also contributed to performance while Asian REITs started to see a gradual recovery. That said, the positive performance from our overweight allocation to equities was inevitably negated to an extent by the bond allocation, as global bond markets including Singapore bonds came under selling pressure on rising interest rates. Over 1Q21, our moderate risk (“Comfy Cruisin’”) Asia SGD Portfolio managed to return +1%.

Looking ahead, we continue to view risk assets favourably and will maintain a tilt towards equities. We are watchful of the rising bond yields although we expect this to peter out eventually. This is because the longer-term inflation outlook still faces structural headwinds such as disruptive technologies, ageing population and rising debt burdens.

The above table is based on the Indicative Model Portfolio gross of fees returns and excludes dividends received.
Individual performance may vary.

12 Jan 2021

1Q21 Commentary: A New Hope

Asia Portfolio

Asia markets carried their positive third quarter gains into the fourth quarter, helped by China’s recovery from the COVID-19 induced recession. Markets that had lagged such as ASEAN led the outperformance as investors started to rotate from markets that did well into those still offering value. Given our overweight allocation to equities, the Asia Portfolio benefited from the strong equity rally.

Looking forward into 1Q21, we maintain an overweight call on equities over fixed income. Given the strong performance of Chinese equities over 2020, we decided to rotate some of our exposure there to Singapore equities. While we remain structurally positive on China, we see room for Singapore equities to play catch-up and potentially outperform on a relative basis in 2021 as the post-COVID global recovery continues into 2021. We are also partially funding this allocation from cash, taking it down to 2% from 5%.

06 October 2020

4Q20 Commentary: On the mend

Asia Portfolio

Over the third quarter of 2020, risk assets such as equities continued to grind higher supported by policy stimulus and the progressive re-opening of major economies. Within Asia, India and China were some of the best performing equity markets over the quarter - this benefited the portfolio given our positioning in both markets. Although Singapore equities saw lacklustre performance over the quarter, we stay constructive as the market continues to look forward to a vaccine discovery soon. Singapore REITS also remained on the recovery trend as the country gradually relaxes COVID-19 restrictions. As such, we continue to stay positioned in the segment.

Looking into the fourth quarter, market volatility may remain high due to near-term uncertainties as we approach the US elections. That said, we continue to advise clients to look beyond the short term. Over the medium term, we stay constructive on equities as interest rates are expected to stay low while the global economy appears to be on the mend, especially if a vaccine is successfully found. We will keep the portfolios under close scrutiny and will use available cash to seize opportunities when they occur.

The above table is based on the Indicative Model Portfolio gross of fees returns.
Individual performance may vary.

04 August 2020

3Q20 Commentary: Capitalizing on the market rebound

Asia Portfolio

Over the second quarter of 2020, given unprecedented monetary support measures from central banks worldwide, Asian markets took a dramatic turn and rebounded strongly across many countries. The SGD Asia digiPortfolio recovered strongly over the second quarter given our positioning toward Chinese equities and REITs. We also added Indian equities to the portfolio in Q2 which benefited the portfolios, as markets that saw large drawdowns in Q1 such as India were key outperformers.

Given our barbell approach, on one hand we decided to increase our exposure to Chinese equities for growth. On the other, we decided to increase our Asia REITS allocation for income on expectations that many Asian economies will gradually ease lockdown measures and progressively re-open their economies, supporting a slow but gradual recovery for REITs. In the fixed income space, we further reduced our government bond exposure to rotate into corporate credit and emerging market debt where we see higher yields. Looking ahead, given the strong market rebound over the second quarter, we will not be surprised should we see a near-term market consolidation. While we continue to closely monitor near-term macro uncertainties, we think central banks will likely provide support if necessary. Thus should that happen, we stand ready to take advantage of any opportunities.

The above table is based on the Indicative Model Portfolio gross of fees returns.
Individual performance may vary.

12 May 2020

2Q20 Commentary: Distancing the short term

Asia Portfolio

Over the first quarter, fears over the COVID-19 pandemic coupled with crude oil price collapse led to a broad sell-off in global markets including Asian equities and corporate bonds. That said, our exposure to Singapore government bonds and investment-grade corporate bonds held up well over the quarter and benefited the portfolios. Our exposure to Chinese equities also contributed as they outperformed many Asian and developed equity markets relatively.

Looking ahead, while markets may likely continue to remain volatile over the near term, we do expect rationality to eventually prevail. With the sharp correction in Indian equity markets, we decided to make use of the opportunity to initiate a position. Besides China, India is one of the largest economies in Asia. Hence we believe that adding India will open up more investment opportunities for the portfolio while improving overall diversification of our equity exposure beyond Singapore and China currently. One key lesson we have learnt through multiple market cycles is the importance of adopting a long-term portfolio approach and improving portfolio diversification. This is what we hope to continuously achieve for the Asia ETF portfolio.

The above table is based on the Indicative Model Portfolio gross of fees returns.
Individual performance may vary.

18 Jan 2023

4Q22 Commentary: The Return of 60/40

Over 4Q22, both equities and fixed income markets rebounded strongly on signs of easing inflationary pressures and expectations of a less hawkish US Fed while China equities rallied following the easing of Covid-19 measures and a roll-out of economic support policies.

We maintained our defensive stance by continued reduction of growth equities and high yield bonds, in favour of quality equities - AB Low Volatility Equity Fund and quality fixed income - Allianz Global Opportunistic Bond Fund.

During the quarter, Global Portfolio Comfy Cruisin' returned +6.1% (in USD) and +4.0% (in SGD terms) while the Global Portfolio Plus Comfy Cruisin' returned +5.1% (in USD) and +3.5% (in SGD terms), with all positions contributing positively. Increasing allocation to value (Harris US Equity Fund) and quality (AB Low Volatility Equity Portfolio) oriented strategies, added value to our portfolio as quality outperformed growth (MSCI World Quality TR Index: +10.2% vs MSCI World Growth TR Index: +4.7%) during the quarter. Further, 10-year US-Treasury bond yields swung from 4.2% to 3.5%, benefitting our global Fixed Income allocation - Allianz Global Opportunistic Bond Fund and Natixis Loomis Sayles Multisector Income. Lastly, our positioning in China staged a rebound after the re-opening of Chinese economy.

Looking into 2023, we continue to remain neutral on equities given rising earnings risk but stay positioned in China and US equities. We upgrade bonds to an overweight, while staying in the high quality space, as we see investment grade credit with yields in excess of 5% providing a blend of income and safety.

While market volatility may remain high in 2023 on recession concerns, we think long-term investors should remain engaged in a multi-asset portfolio of equities and bonds after both asset classes have fallen sharply in tandem last year, as they present an opportunity to invest in high quality securities at attractive valuations.

Figures as of 31 December 2022.
The above table is based on the Indicative Model Portfolio gross of fees returns and excludes dividends received. Individual performance may vary.

06 May 2022

Anchor in the Storm

Global equities and bonds had a turbulent 1st quarter. Investors were concerned that central banks would become overly aggressive in raising interest rates to combat rising inflation. The Russia-Ukraine war added to anxieties as disruption in energy supply caused the oil price to spike to $120. At its trough, the MSCI All Country World Index declined around 13% before rallying to end the quarter -5.4%. The hawkish Fed stance weighed on global bonds and the Bloomberg Barclays Global Aggregate Total Return Index ended the quarter -6.2%.

The weak market returns weighed heavily on our portfolios notably the bond centric ones. The economic backdrop remained strong as developed markets continued to open up. We remained invested with the view that equities prices were oversold and the sharp rise in bond yields had heavily discounted the rise in interest rates. Our CIO office had studied the impact of rising inflation during periods when economic growth remained firm on equities and determined that markets historically continued to rise during these periods. Presently, corporate earnings growth remains good albeit with some moderation. Corporate profitability also looks good, supported by stable household balance sheets and stable wages. Similarly, the negative impact on equities during major military conflicts such as the Gulf War did not last long and markets still rose on average. Over the quarter, Global Portfolio and Global Portfolio Plus (referencing the Comfy Cruisin’ risk level) returned -8.4% and -8.5% (before accounting for dividends paid) respectively.

In equities, we remain focused on growth stocks with an income tilt. We are invested in funds such as the Capital New Economy Fund that invests in global companies benefiting from secular growth trends such as Cloud Computing, E-commerce and digital transformation. We also hold the Franklin US Opportunities Fund that similarly invests in growth companies in the US. In income equities, we have the First Sentier Dividend Advantage Fund that focuses on companies with good cash flow. Asia equities has sold off leaving the underlying dividend yield attractive as dividend pay-out have been relatively stable amid the price correction.

In bonds, we maintained a defensive posture by keeping duration short of around 4.5 to 5 years, focusing the portfolio on developed markets investment grade credits. As treasury yields rose and corporate spreads widened, investment grade corporate bond yields are now at an attractive 4.5%. We continue to favour the Loomis Sayles Multisector Income Fund and the Pimco Diversified Income Fund that are focused on higher income generation strategies in developed markets. In Asia, we will continue to hold the Blackrock Asia Tiger Fund that invests mainly in Asia corporate bonds, capitalising on a recovery in Asia bonds with an attractive yield of around 6%.

Looking ahead, we expect the near-term volatility to linger as the Russia-Ukraine conflict drags on and the Fed continues to fight inflation aggressively. As long as economic growth continues on an upward trend, we expect investor concerns to subside. The DBS economics team expects inflation to peak in the second half and this should give some room for the Fed to moderate its hawkish posture. In Asia, the CIO has upgraded China on valuation grounds with a clear easing tone from the government being the catalyst. We also remain positive on US equities as the recent sell-off has improved valuation. Similarly, the CIO upgraded developed market credits as bond yields are once again attractive. We have introduced another US equities fund and a developed market bonds fund to capitalise on the attractive valuations as part of this quarter’s review.

The above table is based on the Indicative Model Portfolio gross of fees returns and excludes dividends received. Individual performance may vary.

03 Feb 2022

A Divergent World

Global equities rallied in 4Q21 driven by bullish sentiment in developed markets. In contrast, Asia equities declined, weighed by increasing recession risks in China from regulatory tightening. The bond market was flat and struggled against the headwinds of a more hawkish Fed and the correction in China property bonds. In 4Q21, the MSCI All Country World Index rose around 6.7% while the Bloomberg Barclays Global Aggregate Total Return Index was flat.

We remained fully invested during this period with a tilt towards developed market equities. This lifted our moderate risk (“Comfy Cruisin’”) Global Portfolio Plus and Global Portfolio portfolios respectively. Our portfolios have limited exposure to Asia equities and bonds, mitigating the volatility from the China markets sell-off.

During the quarter, the standout performers in developed market equities were the BlackRock European Equity Income Fund that appreciated around 9% and the BNY Mellon Long Term Global Equity Fund that rose around 8%. The First Sentier Dividend Advantage Fund declined 0.70% although this is worth mentioning as it was relatively steady during a volatile quarter in Asia.

Our bond funds declined weighed by the market concerns. We have the Loomis Sayles Multisector Income Fund and the PIMCO Diversified Income Fund that are focused on higher income generation strategies in the developed markets. Over the year, they have performed respectably in a weak bond market. In Asia, we have the BlackRock Asia Tiger Fund that invests mainly in Asia corporate bonds which was affected by the China market sell-off. We will continue to hold this Fund for a recovery in Asia bonds as its yield around 6% looks attractive.

Looking ahead, we continue to view risk assets favourably and will maintain a tilt towards developed market equities. Following the Asia market sell-off, there is potential upside in the medium term. Near term, we expect volatility to linger until growth expectations in China stabilises and prefer to add later. Bonds will continue to face headwinds in 2022 although corporate bonds will benefit from earnings upgrades. We will maintain our focus on corporate bonds, focusing on the BBB / BB rated credit segments.

The above table is based on the Indicative Model Portfolio gross of fees returns and excludes dividends received. Individual performance may vary.

03 Nov 2021

Stay the Course

Global equities consolidated in 3Q21 as investors took stock of the coming tapering of the Fed’s QE program. Investors were more concerned about the regulatory tightening in China in certain sectors namely tutoring, gaming and property leading to a liquidity crisis in the highly indebted property sector. Investors panicked and speculated how much more damage these measures would do to the economy. The MSCI AC World Index declined around 1.5% with the pain largely confined to Asia equities where the MSCI AC Asia ex Japan Index corrected around 10%. The global bond market was flat even as the USD Treasury yield curve steepened. The market felt comfortable that the recent inflationary headwinds were transitionary, and the Fed would pace its tightening stance. Again, the pain was felt more in Asia credits particularly in China high yield bonds because of the events described above. The JPMorgan Non-Investment Grade Total Return Index (Asia HY bonds) declined 5.7% while JPM Investment Grade Total Return Index (Asia IG bonds) rose 0.41%. During the quarter, “Comfy Cruisin’” Global Portfolio Plus USD model portfolio and Global Portfolio USD model portfolio declined slightly around 0.60% and 0.10% respectively. The portfolios held around 50% in equities, 45% in fixed income and 5% in cash. Compared to the composite returns of the Global Equities and Global Bonds indices above, the GP Plus portfolio was slightly lower while the GP Portfolio was better.

Our equities holdings did better than their respective regional indices helped by their focus on developed markets growth equities. Our funds included the Franklin US Opportunities Fund and the Capital New Economy Fund that focuses on companies with firm earnings growth. In Asia, we have the First Sentier Dividend Advantage Fund that focuses on dividend paying companies. Although its returns were negative in 3Q21, it vastly outperformed regional indices and declined around 2% compared to the MSCI Asia ex Japan Index’s 9% decline. We continue to like these funds for their sound approach in stock selection. Our developed market bonds funds also did better than regional indices helped by their focus on corporate bonds that outperformed government bonds. We held the Loomis Sayles Multisector Income Fund and the PIMCO Diversified Income Fund for their focus on higher income generation strategies. On the other hand, the negative returns in the BGF Asian Tiger Bond Fund in 3Q weighed on the bond portfolio. The Fund invests mainly in Asia corporate bonds and was affected by the sell-off in China market bonds. Nevertheless, we believe that much risk has been discounted and Asia bond yields are looking attractive now. We will continue to hold the Fund and may add to it provided that market conditions stabilise.

We see the recent pull back in equities markets as temporary and remain fully engaged. We continue to favour equities over fixed income for its better potential returns in the low bond yield environment. In equities, we are focused on growth themes where earnings visibility is the best in this changing world. Around two-thirds of our equity exposure are in growth funds while the remaining one-third are in income equities as a balance in a barbell format. We stay invested in the equities funds mentioned above. Our view of the bond market is unchanged. We continue to expect the USD Treasury yield curve to steepen gradually. This is with the view that the recent inflationary spikes were transitionary and monetary policy will gradually tighten. Our strategy is to keep duration short and focus on corporate bonds in the BBB / BB segment where risk reward is better balanced. Asia bonds look attractive especially in the BB credit segment in China where bond yields are around 8% to 11%. We will wait for conditions to stabilize before adding fresh positions in Asia. We maintain our position in the BGF Asian Tiger Bond Fund.

We will monitor events closely and adjust our strategy where needed.

The above table is based on the Indicative Model Portfolio gross of fees returns and excludes dividends received. Individual performance may vary.
YTD Returns as of 30 Sep 2021.

19 Jul 2021

Hope into Reality

In 2Q21, Global Equities (referencing the MSCI AC World Index) rose 7.4%, driven by robust corporate earnings and continued liquidity support from central banks in the US and Europe. Global bonds (referencing the Bloomberg Barclays Global Aggregate Total Return Index) gained 0.98%, helped by a moderation in inflation expectations.

During the quarter, both “Comfy Cruisin’” Global Portfolio Plus USD model portfolio and Global Portfolio USD model portfolio made total returns of 4.7%. Both equities and bonds contributed positively with equities showing a larger outperformance, helped by a rebound in the growth funds.

The equity fund that stood out was the Franklin US Opportunities Fund, which invests in growth themes in the US such as semiconductors, enterprise software and healthcare. The other growth funds included in our portfolios are the BNY Mellon Global Equity Fund and the Capital Growth New Economy Fund, both with a bottom up approach to investing. In bonds, the best performer was the Loomis Sayles Multisector Income Fund, a fund which focuses on generating above average cash flows from different income sources. We also have the BGF Asia Tiger Bond Fund, an Asian focused credit fund, for yield pick-up.

The above table is based on the Indicative Model Portfolio gross of fees returns and excludes dividends received. Individual performance may vary.

What’s next

Looking ahead, we continue to favour equities over fixed income. Our equity investments continue to tilt towards growth themes where earnings visibility is the best in this changing world. We also expect the USD bond yield curve to steepen gradually. Thus, our strategy is to keep duration short to mitigate our portfolio sensitivity to potential interest rates rises.

20 Apr 2021

Back on Track

In 1Q21, Global Equities (referencing the MSCI World Index) rose 4.9%, driven by an acceleration in vaccination programs and fiscal stimulus in the US. Global bonds (referencing the Bloomberg Barclays Global Aggregate Total Return Index) declined 4.5% corrected as yields rose. Our portfolios benefitted from being fully invested during this period with a tilt towards equities and -our moderate risk (“Comfy Cruisin’”) Global Portfolio Plus USD model portfolio and Global Portfolio USD model portfolio declined around 0.15% and 0.89% respectively.

Our equities holdings underperformed the 1Q21 market rally. The BNY Mellon Long Term Global Equities Fund and Franklin US Opportunities Fund, which we like for their focus on quality and growth stocks, lagged the rally driven by value stocks this year. With the strong rally in value counters, we expect investors to be more selective in their stock picking, which favours the bottom-up approach of these two funds.

Our bond funds outperformed declining global bond markets by keeping their duration short and focusing on credit, particularly in Asia. We had the BGF Asian Tiger Bond fund, which focuses on Asia corporates, and the Loomis Sayles Multisector Income Fund, that invests in corporate bonds globally. The funds’ strategies will help mitigate the drag from rising bond yields whilst maintaining above-average income streams.

digiPortfolio performance

The above table is based on the Indicative Model Portfolio gross of fees returns and excludes dividends received. Individual performance may vary.

What’s next

Looking ahead, we continue to favour risk assets and will maintain a tilt towards equities. We are watchful of the rising bond yields although we expect this to peter out eventually, as longer-term inflation still faces structural headwinds such as disruptive technologies.

19 Jan 2021

A New Hope

Amid the tumultuous year in 2020, the funds-based digiPortfolios have made positive gains for the full year, following on a successful 2019. We achieved this by maintaining a well-constructed portfolio and focusing on high conviction fund selections.

During 4Q20, the portfolios were fully invested and benefited from the rally in equities and corporate bonds. Some of the notable performers in equities were the Capital New Economy Global Equity Fund, a fund that focuses on growth stocks and is aligned with our DBS CIO Barbell theme. It rose around 16.5% in 4Q compared to the equity market’s 14% return. Meanwhile, the FSSA Dividend Advantage Fund rose around 20%.

Within fixed income, we maintain our favourable view on corporate bonds that we expect will drive bond market returns as the economy recovers. We continue to hold the Natixis Loomis Sayles Multisector Income Fund which rose around 6% over Q4 while the PIMCO Diversified Income Fund appreciated around 4.5%.

digiPortfolio performance

The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.

What’s next

Looking ahead, we expect risk assets, namely equities and credit, to appreciate in 2021. The backdrop for risk taking is favourable – ultra easy monetary policies, less confrontational US-China politics and a viable cure for Covid-19. Heading into Q1, we are comfortable with our fund holdings and will make changes when appropriate.

20 Oct 2020

On the Mend

Updates on Global Portfolio

Global equities and bonds continued to trend up in 3Q20, driven by monetary stimulus as countries progressively emerged from Covid-19 lockdowns.

digiPortfolio performance

The above table is based on the Indicative Model Portfolio gross of fees returns.
Individual performance may vary.

In 3Q20, the Global Portfolio has performed well, and key contributors included AB Low Vol Fund and BNY Mellon Long Term Global Equity Fund. The former benefited from its overweight position in technology (28%). The latter benefited from its overweight position in US equities and technology, investing in growth stocks in line with secular themes we are positive on.

What’s next

Our longer-term view remains unchanged, and we continue to favour Funds investing in growth sectors that are the key beneficiaries in this changing world. We’re adding the Capital New Economy Fund for its participation in secular growth themes globally, aligned with our CIO’s focus on growth sectors. We will adjust the bonds portion to increase our exposure in emerging market bonds when the opportunities arise. We will remain invested to benefit from this policy tailwind and will monitor events closely and adjust our course if needed.

Updates on Global Portfolio Plus

Global equities and bonds continued to trend up in 3Q20, driven by monetary stimulus as countries progressively emerged from Covid-19 lockdowns.

The portfolio benefited from our overweight positioning in Asian and US equities, which were the best performing markets within equities. For fixed income, our preference for corporate credit over government bonds continued to fare well as corporate bonds outperformed government bonds over the quarter.

digiPortfolio Performance

The above table is based on the Indicative Model Portfolio gross of fees returns.
Individual performance may vary.

In 3Q20, the Global Portfolio Plus has performed well and key contributors to performance included Franklin US Opportunities Fund and First State Dividend Advantage Fund. The former was driven by its large tilt in growth and technology stocks with holdings in key industry leaders while the latter benefited from its overweight position in China.

What’s next

Our longer-term view remains unchanged, and we continue to favour US and Asia for their stronger growth potential and attractive sectors. Apart from adding the Capital New Economy Fund for its participation in secular growth themes globally, we will switch into the UBS All China Fund to leverage the funds flexibility to invest in both the China A and H share market. We will remain invested to benefit from this policy tailwind and will monitor events closely and adjust our course if needed.

13 Jul 2020

Capitalizing on the market rebound

Unprecedented monetary support measures from central banks worldwide have led to a sharp recovery in global markets in the 2Q of 2020. Equity markets across the US, Europe and Asia Pacific have recorded double digit returns in the recovery.

Similarly, our portfolios have rebounded strongly as we have remained invested during this period of volatility. Our equity positions, particularly our overweight in the US and Asia equities, were the main drivers of returns.

digiPortfolio performance

The above table is based on the Indicative Model Portfolio gross of fees returns.
Individual performance may vary.

What’s next

Looking ahead, we continue to prefer the US and Asia ex-Japan equities for their stronger economic prospects when compared to Europe and Japan. In fixed income, we are mainly invested in developed market corporate bonds for stability and yield pick up over government bonds. While we remain cautious over valuations, the weaker inflation environment combined with low policy rates should justify higher asset prices.

With equities indices catching up, bond spreads tightening faster, it appears that fear of missing out (FOMO) has re-emerged over the simple fear of losing money. Given the strong rebound seen over the second quarter though, a near-term market consolidation in the months ahead would not be surprising. In such a case, we will again make use of the opportunity to make switches where appropriate.

19 May 2020

Keep calm and practise dollar cost averaging

The market has seen a volatile few months with the concerns over the covid-19 crisis persisting. Global equities (based on the MSCI AC World Index) declined 25% while global corporate bonds (based on the Bloomberg Barclays Global Aggregate Credit Index) declined 4.7%. The economic indicators are already pointing to a global recession as social distancing measures limit activity. To counter the negative impact, policy makers worldwide have implemented massive stimulus programs. Our longer term view is more attractive since bond yields have risen and equities valuations have reverted to the longer term averages.

digiPortfolio performance

The above table is based on the Indicative Model Portfolio gross of fees returns.
Individual performance may vary.

Our portfolios have remained relatively resilient, they are globally diversified and we remain comfortable in our mutual funds holdings. In equities, we favour the US and Asia equities. The latter for its higher growth and cheaper valuations relative to its DM peers. In fixed income, we favour the more stable developed market investment grade credit during this period of volatility and also Asia for its attractive yield and stronger fundamentals in the emerging market world. We will switch our holdings in Goldman Sachs EM Corporate Bond Fund into the Blackrock Asian Tiger Bond Fund, our preferred fund in Asia bonds.