digiPortfolio Updates and Market Insights

Income Portfolio (Fund-based)

Despite market volatility, the Income Portfolio delivered returns of 1.8% (in USD) and 1.1% (in SGD) driven by our strategic focus on quality core income assets over cyclicals, and effective duration management through interest rate volatility.

The portfolio aims to strike a balance between global dividend equities and global bonds while maintaining a consistent income target of around 4.0% p.a. (or 1.0% per quarter).

Key performance drivers were our allocations to Fidelity Global Dividend Fund, due to its European exposure and focus on high-dividend stocks, First Eagle Amundi International Fund, a new addition bringing global value equity exposure and our allocations to global bond managers, which delivered stable income through quality fixed income strategies.

Looking ahead, we expect markets to remain volatile due to unpredictable U.S. economic policy. As a result, we are keeping a neutral stance on equities while staying positive on bonds, particularly high-quality ones.

In the short-term, we view that Europe could benefit from this volatility and hence we adjusted our portfolio to add towards Europe tilted Fidelity Global Dividend Fund by reducing allocation from AB Low Volatility Equity Fund.

We continue to closely monitor this dynamic market environment, tracking signs of capitulation, potential shifts in policy tone, and areas where opportunity may emerge. History reminds us that periods of turbulence often sit alongside moments of recovery, reinforcing the value of staying thoughtfully invested through cycles.

The portfolio’s current allocation is approximately 50% in global equities and 46% in global bonds. Within equities, the focus remains on dividend-oriented funds with stable cash flow generation (average dividend yield 2.5%).

Our fixed income is targeted towards higher quality investment grade bonds for their attractive yields, with an average credit rating of A, moderate duration of 4.5 years and a yield-to-maturity of 6.2% (based on end-Mar 2025 fund data).

Income PortfolioMedium Risk
Q1 2025SGD1.1%
USD1.8%
1 YearSGD6.2%
USD7.5%

Figures as of 31 March 2025.
The above table is based on the Indicative Model Portfolio returns and is gross of fees. Individual performance may vary.

 

SaveUp Portfolio (Fund-based)

The Save Up Portfolio delivered a stable return of 1.6% (in SGD). This was mainly driven by our allocation to flexible bond managers who were able to take advantage of market movements. All portfolio holdings contributed positively, with top performers being PIMCO GIS Income Fund and Fullerton Short-term Interest Rate Fund.

To better position the portfolio for ongoing volatility, we extended portfolio duration.  This was done by reducing our exposure to floating rate bonds by exiting Allianz Global Floating Rate Notes Plus. Increasing allocations to high-quality bond funds, including Allianz Global Opportunistic Bond and Fullerton Short-term Interest Rate Fund.

Taking these moves into account, the portfolio’s model characteristics were as follows: yield-to-maturity stood at 5.32%, with a duration of about 2.45 years. It has an average credit rating of A with high yield allocation around 5.6% (as of end-Feb 2025).

With interest rate cuts becoming more likely, this environment is attractive for investors looking to put their cash to work. Thanks to its short-duration and quality-focused approach, the Save Up Portfolio is well-positioned to navigate market ups and downs while offering attractive income potential.

SaveUp PortfolioLow Risk
Q1 2025SGD1.6%
1 YearSGD4.5%

Figures as of 31 March 2025.
The above table is based on the Indicative Model Portfolio returns and is gross of fees. Individual performance may vary.

Global Portfolio (ETF-based)

In a mixed market environment, the Global ETF Portfolio remained resilient delivering a total return of 1.2% (in USD, for medium risk). The weakness in U.S. equities was cushioned by our investments in Europe and Asia, as well as our focus on high-quality, longer-duration bonds.

We expect markets to remain volatile due to unpredictable U.S. economic policy. As a result, we are keeping a neutral stance on equities while staying positive on bonds, particularly high-quality ones.

To reflect this view, we have slightly reduced our stock exposure and increased investments in gold producers and investment-grade bonds, helping the portfolio stay defensive yet ready for opportunities ahead.

Lastly, we continue to closely monitor this dynamic market environment, tracking signs of capitulation, potential shifts in policy tone, and areas where opportunity may emerge. History reminds us that periods of turbulence often sit alongside moments of recovery, reinforcing the value of staying thoughtfully invested through cycles.

Global PortfolioLow RiskMedium RiskHigh Risk
Q1 2025USD2.5%1.2%0.3%
1 YearUSD7.5%8.2%8.7%

Figures as of 31 March 2025.
The above table is based on the Indicative Model Portfolio returns and is gross of fees. Individual performance may vary.

Global Portfolio Plus (Funds-based)

In a challenging market environment, the Global Portfolio held up relatively well, with price returns (excluding dividends) of -0.7% in USD and -1.8% in SGD for the medium risk profile. The weakness in U.S. equities was partly balanced by our diversified exposure to European and Asian markets, along with a focus on high-quality, longer-duration bonds, which provided some stability.

The top-performing investments in the portfolio were our global and Asian bond funds, particularly the PIMCO GIS Income Fund and BGF Asian Tiger Bond Fund, which helped cushion the impact of equity market declines. On the other hand, growth-focused equity funds like Capital Group New Economy and BNY Mellon Long-Term Global Equity faced pressure and were the main detractors during the period.

Looking ahead, we expect markets to remain volatile due to unpredictable U.S. economic policy. As a result, we are keeping a neutral stance on equities while staying positive on bonds, particularly high-quality ones. The portfolio is well positioned for this narrative, with a 50% exposure to global equities and 48% exposure to global bonds as of end-March 2025.

We continue to closely monitor this dynamic market environment, tracking signs of capitulation, potential shifts in policy tone, and areas where opportunity may emerge. History reminds us that periods of turbulence often sit alongside moments of recovery, reinforcing the value of staying thoughtfully invested through cycles.

Global Portfolio PlusLow RiskMedium RiskHigh RIsk
Q1 2025SGD0.8%-1.3%-2.8%
USD1.3%-0.5%-1.6%
1 YearSGD3.4%2.8%2.6%
USD5.1%4.1%3.6%

Figures as of 31 March 2025.
The above table is based on the Indicative Model Portfolio returns and is gross of fees. Individual performance may vary.

Asia Portfolio (ETF-based)

In 1Q25, Asian markets performed well, thanks to a strong rally in Chinese stocks and steady returns from Asian bonds. A major highlight was the launch of DeepSeek, an affordable, open-source AI model from China. This breakthrough sparked investor excitement around Chinese technology companies, further supported by government backing.

In contrast, Indian stocks pulled back, as investors rotated funds from higher-priced markets like India to more attractively priced ones like China. That said, we are beginning to see early signs of recovery in India after a decline of over 15% in just a few months.

The Asia ETF Portfolio delivered strong returns of 3.7% (in SGD), supported by our larger positions in China and Singapore stocks. Reducing our holdings in Singapore REITs (S-REITs) in 2H24 also helped protect against declines in that sector.

Looking ahead, we believe markets may stay volatile due to changing U.S. economic policies. To stay resilient, we are focusing more on Asian economies driven by domestic consumption, which tend to be more stable. We have reduced our exposure to Singapore and Japan, while increasing investments in China and India, where we see better long-term opportunities.

Asia PortfolioLow RiskMedium RiskHigh Risk
Q1 2025SGD2.1%3.7%5.1%
1 YearSGD8.4%12.7%16.5%

Figures as of 31 March 2025.
The above table is based on the Indicative Model Portfolio returns and is gross of fees. Individual performance may vary

Retirement Portfolio

Q1 2025 Market Review

The first quarter of 2025 proved a volatile period for equity and bond markets. Elevated uncertainty stemming from the unpredictable nature of US trade policy dampened growth expectations in the US, while in Europe, the fiscal response had been much more forceful than many were anticipating.

Developed equity markets struggled over the quarter as tariff-related headlines buffeted US equity markets, with the MSCI World (local currency) index down -2.7%. The US administration announced a raft of new tariffs on steel, aluminium and autos, while shifting expectations around the severity of pending tariff announcements due on 2nd April drove swings in market sentiment.

Value stocks outperformed their growth counterparts, while smaller companies lagged as rising trade uncertainty drove concerns around both weaker growth and stronger inflation. Emerging market equities outperformed developed markets, posting a 2.7% return (MSCI Emerging Markets, local currency) as Chinese and Korean equities both performed strongly. Asian equity markets saw high levels of dispersion. Chinese stocks outperformed thanks to a combination of US tariffs so far proving less punitive than feared, improving sentiment towards Chinese technology stocks following DeepSeek’s AI breakthrough, and hints of a more supportive policy stance from Beijing. In contrast, Indian stocks struggled while a stronger yen driven by narrowing interest rate differential created headwinds for Japanese equities.

Fixed income markets outperformed developed equities with rising recession risks leading to a return of 1.1% (JPM GBI, USD Hedged). US Treasuries were notable outperformers over the quarter, returning 2.9%. Conversely in Europe, expectations of much larger issuance to finance new government spending programmes weighed on sovereign bond returns and saw 10-year German Bund yields rise by more than 30bps (basis points) on the day after the €500bn infrastructure spending plan was announced. Japanese government bonds were the notable underperformer as recent data emphasises building inflationary pressures. Given elevated uncertainty, the Federal Reserve (Fed) decided to take no action on interest rates over the quarter but Fed Chair Powell did leave the door open to future rate cuts at the March meeting, suggesting the Fed was more concerned about the downside risks to growth than the upside risks to inflation. The European Central Bank (ECB) was more positive about the prospect of further fiscal stimulus ahead, with ECB President Lagarde explicitly praising the change in approach at the March meeting. The ECB cut interest rates twice during the quarter, with a further 60bps of cuts priced by markets by the end of 2025.

Market Outlook

JPMorgan Asset Management believes that the outlook for U.S. tariff policy remains highly uncertain. We will continue to monitor any potential retaliations from trading partners, the outcomes of individual country negotiations, and potential concessions/exemptions, as well as the impact these tariffs may have on U.S. growth and inflation.

JPMorgan Asset Management continues to reduce equity risk as tariff news develops, maintaining a neutral to modest overweight stance across portfolios. We seek to diversify our investments by expanding our exposure to regions and sectors outside of the U.S., particularly in Europe and Japan.

JPMorgan Asset Management also sees opportunities in credit as all-in yields remain attractive, though the magnitude of the positiveness has moderated.

Retirement Portfolio

Early Career

Mid Life

Near Retirement

Q1 2025

SGD

0.3%

0.2%

0.9%

1 Year

SGD

4.9%

4.6%

3.2%

Figures as of 31 March 2025.
The above table is based on the Indicative Model Portfolio returns and is gross of fees. Individual performance may vary.

digiPortfolio: 2024 in review

Achieving positive returns amidst market challenges 

In 2024, we witnessed a shift in the economic landscape, driven by the changing interest rate environment and US presidential elections. While these caused market fluctuations, they also presented opportunities to strategically adjust investment portfolios.

With 2024 behind us, we'd like to share key market highlights and insights from DBS Chief Investment Office (CIO) and the team managing your digiPortfolios.

A Tale of Two Halves

In 1H24, inflation moderated from 2023 highs, and economic growth remained resilient. This created heightened market volatility as investors weighed the probabilities of a soft landing versus a recession. In Asia, while China’s economic recovery was slower than expected, other economies performed well, resulting in a mixed overall performance.

The US Federal Reserve's long-awaited rate cut in 2H24 – that served up a bumper 50-basis-point cut in September, marked the start of a monetary easing cycle. Singapore's 6-month Treasury bill auction on 19 December 2024, yielded a 3.02% p.a. cut-off rate, reflecting the broader trend of lower interest rates. This spurred increased investor interest in global bonds seeking higher yields.

In November, Donald Trump and the Republicans attained a “trifecta” victory at the US Elections. The market balanced the inflationary implications of Trump 2.0 policies against the growth prospects of pro-cyclical measures, while responding to key nominations made ahead of the January inauguration.

How has digiPortfolio performed in 2024?

Here are the performance figures for digiPortfolios in 2024:

Portfolio 

Total Returns as of 31 Dec 2024 

Retirement Portfolio SGD1 

12.2% 

Global ETF USD2  

11.1% 

Global Portfolio Plus SGD2 

7.3% 

Asia ETF SGD2 

7.7% 

Income SGD 

7.0% 

SaveUp SGD 

2.7% 

1Retirement digiPortfolio utilises a glidepath strategy based on an individual’s years to retirement to determine the portfolio mix. Figures referencing a 70% equity – 30% bond mix.
2Based on Comfy Cruisin’ (medium risk) Portfolios.

Global Portfolios 

The portfolio performance through the year was supported by our view to trim Europe equities in favour of US equities, and our overweight stance on Asia. Fixed income also contributed positively, supported by our focus on duration management in a challenging interest rate environment. Overall, it was a strong year for globally diversified portfolios with the Global ETF portfolio and Global Portfolio Plus delivering total returns of 11.1% (in USD) and 7.3% (in SGD) on a YTD basis. Retirement digiPortfolio, a global portfolio by nature with its diversified mix of global equities and bonds, benefited as well with positive YTD returns across all portfolio mixes.  

Asia ETF Portfolio 

Despite the diverging performance of Asian economies, the overall performance during the year was supported by a rebound in China equities, stable returns from Indian equities and a strong outperformance by Singapore equities. Additionally, our decision to reduce Asian Real Estate Investment Trusts (REITs) in 3Q24 buffered the portfolio against market volatility. Overall, the portfolio generated a total return of 7.7% (in SGD) during the year. 

Income Portfolio 

The Income Portfolio delivered a total return of 7.0% (in SGD) driven by our strategic focus on quality core income assets over cyclicals, and effective duration management through interest rate volatility. The portfolio aims to strike a balance between global dividend equities and global bonds while maintaining a consistent income target of around 4.0% p.a. (or 1.0% per quarter).

SaveUp Portfolio

SaveUp portfolio delivered a total return of 2.7% (in SGD), achieving its goal of outpacing cash investments. The short duration nature of the portfolio and high-quality positioning contributed to its positive performance, despite weakness in the broader bonds market. The recent volatility in interest rate environment presents a favourable entry point for investors to deploy additional cash to short-duration investments, as a hedge against inflation and declining deposit rates. 

Looking Ahead 

The recent Fed rate cuts and continued corporate earnings growth support our positive outlook on risk assets. However, we'll maintain a selective approach to both equities and fixed income to capitalise on specific opportunities. 

Our 2024 performance underscores the importance of a diversified investment strategy. By staying adaptable to changing market conditions, we continue to build resilient portfolios for long-term growth. 

Shifting Currents in 2024

As we transition from a turbulent 2023 into a more certain direction in 2024, we now expect a tapering of US rates as economic data on growth and inflation points to a softening. This signals a supportive environment for fixed income whilst being cautious on equities.

Throughout the year, we have emphasized the importance of the enduring value of long-term investing and the merits of dollar-cost averaging (DCA). Despite the short-term volatilities we experienced in 2023, we saw the resilience of the market and favourable returns over the year. By staying invested for the long-term and through DCA, you can ride through market fluctuations and capitalise on growth trajectories over time.

Thank you for your continued trust in digiPortfolio. Stay informed with our updates through: 

  1. Who Moved My Investment Portfolio Quarterly video series covering market trends and portfolio updates 
  2. Quarterly Commentary and Insights Available on digiPortfolio dashboard within digibank and the Insights webpage. 
  3. Quarterly Email UpdatesDelivered to your registered inbox. 
  4. Quarterly Factsheets Available on the digiPortfolio dashboard. 
digiPortfolio: 2023 in review

digiPortfolio: 2023 in review

Markets never move in a straight line and 2023 was testament to that. The year started with several uncertainties but looks to have closed the year on a positive note. The DBS investment team, that monitors and manages your digiPortfolios, shares their reflections on key events that defined 2023 and the impact the DBS Chief Investment Office (CIO) views had on your portfolios.

Spill over from 2022

2022 saw aggressive fed rate hikes by the US Federal Reserve, resulting in an environment that was challenging for both equities and bonds. This isn’t common as these two asset classes are typically less correlated. Investors were also anticipating a possible US recession in 2023 as higher rates would slow growth by driving up borrowing costs for businesses and consumers.

Instead, the US economy stayed resilient in 2023 as inflation slowed and the job market remained stable. Recession fears eventually receded and the Fed hit the pause button in July 2023. Markets started factoring in the possibility of rate cuts in 2024, which played a role in driving markets to finish out Q4 2023 strongly.

AI-powered rally

Despite a cautious end to 2022, the S&P 500 staged a strong recovery in H1 2023 on the back of confidence around Generative Artificial Intelligence (AI). Resultantly, the “Magnificent 7” – the S&P 500’s mega-cap technology stocks - dominated headlines with 71% year-to-date performance and related companies such as chip makers to cybersecurity also benefited from the rally.

Across 2023, the investment team’s overweight calls on tech-related growth plays yielded positive results. This is expected to extend into 2024, supported by technology tailwinds and anticipation of rate cuts.

Re-rating of China Equities

China finally moving away from its Covid Zero policy was eagerly anticipated with expectations that Asia’s largest economy was going to roar back into life. Unfortunately, this did not materialise as domestic consumption remained weak given ongoing concerns over the property sector. That said, the Chinese authorities have shown that they are prepared to step in where necessary to provide measured and targeted support.

With these key events in mind, how have our portfolios performed?

Global Portfolio (ETF)

Year-to-date, global equities (referencing the MSCI World index) and global bonds (referencing the Bloomberg global aggregate index) returned 23.12% and 4.71% respectively. The Comfy Cruisin’ Global portfolio returned 10.1% before dividends paid, and this can be attributed to some of the positive calls made in the portfolio.

Within equities, the portfolio has maintained sizeable allocations to developed market equities, especially the US. This played a key role to performance as US equities outperformed on the back of favourable economic data and strong corporate earnings. The investment team also added to Japan equities which contributed positively on expectations of more structural reforms which can boost corporate profitability. On the other hand, China equities, which were trading at multi-year lows, weighed down on portfolio performance. Opportunities do exist in China as a deep value play, which reinforces our constructive outlook.

For bonds, the strategy primarily entailed maintaining an underweight allocation and shorter duration throughout the first half of the year in response to the rising interest rates, which yielded favourable results. For H2 2023, the investment team increased fixed income allocation and extended the portfolio duration, with emphasis remaining on high-quality developed market government bonds and investment-grade credit. This proved beneficial, given the recent decline in interest rates.

Asia Portfolio (ETF)

2023 was a challenging year for Asian markets, especially China. Despite multi-year low valuations offering deep value, Chinese equities endured another difficult year, declining 13.4% (referencing the MSCI China Index in SGD terms), dragged by the country’s weaker than expected post-covid economic recovery, property sector woes and geopolitical tensions.

As a result, Chinese equities weighed down on most of the portfolio’s performance, with the Comfy Cruisin’ Asia portfolio returning -2.2% year-to-date. That said, the Chinese government has stepped up efforts to support its economy in recent months. Earnings results from big Chinese internet companies have been encouraging as they reported recovering earnings fundamentals.

The Indian market stands poised to capitalise on robust secular tailwinds, potentially positioning itself as one of the world’s fastest-growing economies in the upcoming years. As such, the investment team trimmed Chinese equity allocation and increased allocation to Indian equities. There is still a sizeable allocation to Chinese equities as is it offers deep value for investors.

For Asian REITs, our patience paid off as the asset class rebounded strongly in Q4 2023 on expectations of interest rate cuts in 2024. Looking ahead, attractive valuations and lower interest rates should support further rerating of REITs over 2024. Tapering interest rates in 2024 will be favourable for bonds and therefore we stay overweight on SGD government bonds and investment grade credits.

SaveUp Portfolio

Our SaveUp portfolio is a conservative risk portfolio which invests primarily in high quality fixed income instruments to generate total returns. A key feature of the portfolio is its shorter-term time to maturity of less than 3 years. Compared to longer-term bonds, this makes it less sensitive to interest rate movements held in a traditional bond fund.

Due to its shorter duration, the SaveUp portfolio is more sensitive to the 2-year US Treasury bond yield movements, which grew quarter-on-quarter as the Fed embraced a ‘higher for longer’ policy stance. The overall bond market (Bloomberg Global Aggregate Bond Index) detracted by -2.20% between Q1 to Q3.The portfolio declined in a similar fashion with year-to-date performance of -0.96% before dividends paid; however, the impact was cushioned by income-generating investments within the portfolio.

Throughout the year, we have adjusted the duration of the portfolio down to maintain our short duration target by funding new positions with shorter duration. Our call on high-quality funds have also worked well, as these have contributed positively to returns.

Opportunities lie ahead for fixed income investors as yields continue to stay elevated. Quality short-term fixed income yields remain at multi-decade high, offering higher expected returns over fixed deposits or SG T-bills.

Income Portfolio

The Income Portfolio is constructed for investors seeking the stability of regular income streams. With a focus on global income-generating assets, the Income Portfolio Comfy Cruisin’ is made up of fixed income securities across government bonds, corporate bonds and emerging markets, and income equities. Year-to-date, the portfolio recorded 1.1% (USD denominated) and 0.2% (SGD denominated) in returns before dividends received.

Through the year, the Income Portfolio performance was supported by our view of extending duration, high yields from high quality credit and stable performance from income equities. In addition, the portfolio paid out 4% p.a. in dividends for the year.

Shifting Currents in 2024

As we transition from a turbulent 2023 into a more certain direction in 2024, we now expect a tapering of US rates as economic data on growth and inflation points to a softening. This signals a supportive environment for fixed income whilst being cautious on equities.

Throughout the year, we have emphasized the importance of the enduring value of long-term investing and the merits of dollar-cost averaging (DCA). Despite the short-term volatilities we experienced in 2023, we saw the resilience of the market and favourable returns over the year. By staying invested for the long-term and through DCA, you can ride through market fluctuations and capitalise on growth trajectories over time.

Thank you for your continued support and as we approach a new year, the digiPortfolio team will strive to provide updates on the latest happenings in the market and portfolio performance through:

  1. “Who Moved My Investment Portfolio”, our quarterly video series addressing hot topics driving markets and updating you on how the digiPortfolio team is keeping portfolios resilient.
  2. Quarterly commentary from the digiPortfolio team on the DBS digibank digiPortfolio dashboard as well as our digiPortfolio insights webpage.
  3. Quarterly digiPortfolio factsheets on the digiPortfolio dashboard.
  4. Quarterly summarised updates sent to your registered email.

Performance figures indicated are YTD as of 15 December 2023.

digiPortfolio: 2022 in review

29 Dec 2022

digiPortfolio: 2022 in review

2022 was a challenging year for investors with 3 key events dominating headlines. As these events unfolded, the DBS investment team was hard at work monitoring portfolios and making tweaks that aligned them with the views of the DBS CIO office.

As we close out the year, here's a summary of these 3 events that defined 2022 for investors.

The Fed battles inflation

At the start of 2022, the US Federal Reserve had a sanguine view on inflation, describing it as "transitionary" owing to factors such as the Covid-19-related supply chain disruptions and the war in Ukraine.

However, that did not last long as before the end of 1H22, the Fed started to pivot towards an aggressive tightening policy, taking markets by surprise. This hurt both equity and fixed income markets, which rarely move in tandem.

The Fed funds rate moved sharply upwards from 0% - 0.25% in January to 4.25% - 4.5% in mid-December, effectively ending a decade-long era of ultra-loose monetary policy.

Russia-Ukraine conflict

One of the contributors to rising inflation was energy prices, with a key factor being the war in Ukraine. As Russia is one of the main energy producers globally, the conflict resulted in energy price volatility emerging from supply shortages and sanctions.

Apart on its impact on energy prices, the prolonged incursion in Ukraine was a headwind for investor sentiment.

China’s zero-covid policy

In Singapore, we will likely remember 2022 as the year the city-state eased Covid-19 restrictions. From mask wearing to travel quarantine protocols, we started to transition back to life before.

Other countries eased restrictions too. However, it wasn't the case in China where authorities maintained their zero-Covid stance before finally easing last month. After multiple quarters of suppressed market sentiment, markets lauded these reopening moves and share prices started to rebound.

digiPortfolio in review

Very rarely in the history of financial markets do we see both equities and safer assets like government bonds falling sharply and in tandem. On the back of the Fed pivoting sharply towards aggressive hikes, 2022 was one of those rare years.

Let's review the performance of two of our portfolios.

Global Portfolio (ETF)

On a year-to-date basis, global equities (referencing the MSCI World index) and global bonds (referencing the Bloomberg global aggregate index) returned -18.4% and -16.2% respectively. The Comfy Cruisin’ Global portfolio held up better at -14.8%.

These returns can be attributed to some of the stronger calls made in the portfolio.

When the war in Ukraine first broke in 1Q22, the investment team reduced exposure to European equities as energy prices soared and this positioning helped cushion the portfolio from further downside.

Within fixed-income, with the Fed continuing to sharply hike rates through Q3 with no signs of slowing down, the investment team then shifted towards shorter-duration and higher quality bonds in developed markets. This helped to mitigate volatility arising from interest rate movements and credit risk.

One detractor within the portfolio was the allocation in US equities in Q2. After the price correction in US equities earlier in the year, valuations appeared attractive and presented a compelling entry point for the investment team.

Asia Portfolio (ETF)

Apart from the impact of the Fed’s policy tightening, investor sentiment in Asia was also dampened by China’s reluctance to ease its zero-Covid policy.

Year-to-date, Asia equities (referencing the MSCI Asia Ex Japan index in SGD terms) and Asia bonds (referencing the JPM Asia Credit Index in SGD terms) returned -19.44% and -10.08% respectively. The Comfy Cruisin’ Asia portfolio did fare better as well at -10.8% even without accounting for dividends.

Like our Global portfolio, the investment team held a high quality and defensive stance as the year unfolded.

With increased exposure to IG bonds, S-REITs and government bonds added to the defensive nature of the portfolio.

Maintaining allocation to the Straits Times Index also contributed as one of the few positive performing markets in 2022.

However, our overweight stance on China provided mixed results across different quarters as sentiment ebbed and flowed. Positive returns for Chinese equities in Q2 were negated in Q3 before rallying in November again on expectations of reopening. This remains a constructive view heading into 2023 on valuations as well as re-rating opportunities from reopening.

The road ahead

Heading into 2023, all eyes continue to be on the Fed as they are expected to continue its monetary tightening policy, albeit at a slower pace.

As the saying goes, “never waste a crisis” and the investment team will continue to monitor and seek opportunities as markets evolve.

One’s investment journey is never about a short sprint, and we continue to advocate investors to stay the course, maintain a long-term view, and adopt a patient “dollar-cost average” approach particularly with the experience of 2022 in mind.

This journey is also one that investors do not have to be alone in. As with 2022, the digiPortfolio team will continue to open new communication channels and provide regular updates to you. These are currently available through:

  1. “Who Moved My digiPortfolio” is a new quarterly video series addressing hot topics driving markets and providing insights on how the digiPortfolio team is keeping portfolios resilient.
  2. Quarterly commentary from the digiPortfolio investment team on the digiPortfolio dashboard as well as our digiPortfolio insights’ webpage.
  3. Quarterly digiPortfolio factsheets on the digiPortfolio dashboard.
  4. Quarterly summarised updates sent to your registered email.

 

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

Staying diversified amidst China panic

18 Mar 2022

Staying diversified amidst China panic

The MSCI China Index, which tracks China equities, suffered from a turbulent start to the week as it faced a two-day sell-off, losing more than 14%. It was little different for the Hang Seng Tech Index, which tracks the performance of Chinese technology stocks. It plunged 18% since last Friday (11 Mar 2022).

Recent heavy sell-offs are deemed to be triggered by a combination of factors relating to:

  1. Worries that US allegations of China’s ties to Russia could lead to further sanctions on Chinese companies
  2. Regulatory headwinds in sectors like property and technology that have persisted since 2021
  3. The impact of renewed Covid-19 lockdowns affecting the domestic economy

These concerns outweighed positive economic data on Tuesday signalling strong retail sales and industry output in January and February 2022 as well as assertions that China is not involved in Russia’s war with Ukraine.

Diversification within the portfolio

It is often said that “Too much of a good thing can be bad”. This holds when it comes to investing too. At times, investors can hold a very positive view on certain markets or sectors, which might lead them to invest too heavily into those areas. Instead, investors should realise the importance of sizing up appropriate allocations within a portfolio.

As the largest economy in Asia, China investments would naturally have a place in well diversified global investor’s portfolio, let alone an Asia investor’s portfolio. It is no different for digiPortfolio as its portfolio managers seek to draw on multiple sources of returns, providing for diversification. While a well-diversified portfolio doesn’t eliminate risk, it can cushion the blow from heavy sell-offs in particular markets and sectors.

While the Asia Portfolio (Comfy Crusin’) invests in China equity as well as a China technology index, the allocations are moderated with a 15% allocation to a MSCI China ETF and just 3% in the Hang Seng Tech ETF. The Asia Portfolio further invests in Singapore bonds, Singapore equities, Real Estate Investment Trusts (Reits) and India equities within a well-diversified portfolio.

While the portfolio is down 5.4% for the month, the drawdown is relatively muted compared to the markets and sectors that are feeling the brunt of the turmoil this week.

1M returns in SGD (15 Feb – 14 Mar 2022)

MSCI Asia Ex Japan index

-12.0%

MSCI China index

-23.4%

Hang Seng Technology index

-30.3%

Asia Portfolio (Comfy Crusin’)

-5.4%

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.

Navigating the Russia-Ukraine crisis

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.

1.   What's happening

Why did the crisis unfold?

In the years after the breakup of the Soviet Union (USSR) in 1991, many newly independent states of the former Eastern Bloc chose to join the North Atlantic Treaty Organization (NATO), a defensive alliance.

There are two distinct viewpoints on what triggered the Russia-Ukraine crisis.

The Russian view: NATO's expansion to Eastern Europe is a security threat, with the alliance's intention to admit Ukraine, deemed has crossing the line.

The US view: US President Joe Biden believes Russian leadership is harbouring a bigger ambition beyond Ukraine, to “reestablish the former Soviet Union”.

Sanctions on Russia

Economic and Financial: Limited access to financial systems for banks, key state-owned companies, and individuals as well as asset freezes and visa restrictions.

Technology: Ban on the import and export of technological goods, suspension of licenses, ban on sale of aircraft and equipment, and limits on access to semiconductors and select software.

SWIFT: Banning of some Russian banks from using the platform, which is a messaging network for financial institutions to securely send and receive information.

Low risk of economic contagion

As Russia accounts for only 1.8% of global gross domestic product, the impact on the global economy is likely limited. This compares with 24.7% for US and 17.4% for China. In terms of global trade flows, Russia accounts for only 1.7% of global exports (vs 9.5% for US and 12.1% for China), and 1.4% of global imports (vs 12.8% for US and 10.8% for China).

A bigger threat is likely to come from commodity prices. With Russia a primary exporter of energy to Europe, a prolonged crisis may result in slower production and supply shortages.

US Federal Reserve policy could be affected

With sentiment taking a turn from geopolitical tensions, the Fed could invoke more caution in the hiking cycle and pare back expectations for aggressive hikes.

Unlikely the start of a bear market

On average, global equities have rallied 38% during military conflicts. Rising uncertainties, meanwhile, triggered average gains of 138% for gold and 89% for crude oil.

During the 2014 Crimean crisis, where Russia invaded and annexed the peninsula from Ukraine, global equity markets were flat while gold and oil registered only slight dips.

European banking system little affected

Most European banks derive 1% to 2% of their profits of even less from Russia, and a much lower percentage in terms of total banking assets. Moreover, they have sufficient capital buffers to weather the direct impact of the Ukraine crisis.

The European Central Bank (ECB) could also turn more cautious on policy tightening given the proximity of the crisis to the continent, allowing funding conditions to remain stable while tensions persist.

2.  What to expect now

Demand for inflation hedges, geopolitical risks, and volatility is expected to rise leading to higher gold prices. As a hard asset, gold has preserved and risen in value during environments of hyperinflation, stagflation, and negative interest rates. Its attribute of being uncorrelated to risk assets makes it an effective hedge during periods of high volatility.

Europe is most exposed to the conflict due to its proximity as well as dependency on Russia’s energy resources. Domestic sentiments will likely be weak in the near term, and recovery delayed. Investors should stay with resilient sectors such as oil majors, luxury brands, and commodity producers while scanning the banks for exposure to Russia and companies involved in the Nord Stream 2 project, which has been halted.

3.  Are there market opportunities?

Investors can consider focusing on sectors and secular themes that are supported by strong fundamentals and resilient against geopolitical events. These are predominantly sectors with globally diversified revenue streams and pricing power.

The investment expressions include US big cap Technology stocks and global Health Care sectors which will maintain outperformance over the broader markets. For Technology, we maintain our conviction on semiconductor upstream and equipment, software services, cyber security, cloud computing, and electric vehicle supply chain. For Health Care, we like large pharmaceuticals and drug developers.


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.