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  • Gain insights to market changes and how it affects investments

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Who moved my digiPortfolio?

Keep up-to-date with quarterly videos that cover hot topics in the investment world and the views that are driving your digiPortfolios.

Meet the expert

Ever wonder what goes on behind the scenes in digiPortfolio? Find out exactly that and key investment principles from one of the portfolio managers.

Quarter 2 video update

With interest rates at a high, should we still invest? Alvin and Lynette discuss.

More about our experts:
Alvin is a portfolio manager at DBS, managing discretionary mandates and mutual funds for high networth clients as well as digiPortfolio. He has over 15 years of industry experience spanning across asset management and private banking. Lynette is a Financial Planning Literacy Specialist at DBS. She creates articles and videos to educate customers on getting more from their money, whether it’s managing, saving or investing it toward their goals.

 

Break in the Clouds

In 1Q23, both equities and fixed income markets rebounded by 7.3% and 3.0%, respectively, on expectations of a less hawkish US Fed. The market rally was led by growth equities and long-dated government bonds, both responding to the drop in bond yields.

Looking ahead into 2Q23, we maintain an overall neutral stance on equities with a tilt towards Asian equities. We continue to stay overweight on fixed income with a quality bias towards US Treasuries and Developed Market Investment Grade corporate bonds. While market volatility may remain high as the Fed navigates through their policy stance, 1Q23 was a testament to staying invested in the market. In such an environment, we remain fully engaged with focus on building resilience and quality in our portfolios.

In 1Q23, both equities and fixed income markets rebounded by 7.3% and 3.0%, respectively, on expectations of a less hawkish US Fed. The market rally was led by growth equities and long-dated government bonds, both responding to the drop in bond yields.

During the quarter, the Income portfolio returned +1.8% (in USD) and +1.3% (in SGD terms) in addition to the income distributions, with all positions contributing positively. Top contributors were a global dividend-oriented fund – Fidelity Global Dividend Fund and a global multi-asset fund – First Eagle Amundi Income Builder. Furthermore, the drop in yields also benefited our fixed income allocations – 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 4.5% p.a., supported by higher yields from fixed income and income equities.

Looking ahead into 2Q23, we maintain an overall neutral stance on equities with a tilt towards Asian equities. We continue to stay overweight on fixed income with a quality bias towards US Treasuries and Developed Market Investment Grade corporate bonds. As such, we initiated a new position in Ninety-One Global Multi Asset Income fund, which is a cautious mixed-asset fund with a bias on quality and downside protection.

While market volatility may remain high as the Fed navigates through their policy stance, 1Q23 was a testament to staying invested in the market. In such an environment, we remain fully engaged with focus on building resilience and quality in our portfolios.

Income Portfolio Comfy Cruisin
1Q 2023 USD 1.8%
SGD 1.3%

Figures as of 31 March 2023.
The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.


During 1Q23, Singapore short term investment grade corporate bonds, as represented by the iBoxx SGD Investment Grade 1-3 year Total Return Index rose 0.6%, helped by a drop in the underlying government bond yield. The Save Up portfolio, returned around 0.6% in addition to the income distributions with all holdings contributing positively.

The SaveUp model portfolio characteristics are as follows: portfolio yield-to-maturity stood at 5.1%, with a duration of about 2.5 years. It has an average credit rating of A with high yield allocation below 10%, supported by our focus on quality.

To position for 2Q23, we have initiated two new positions: (1) DBS CIO Liquid+ Fund, which provides exposure to global high quality corporate and government bonds, offering stability and yield with a duration of 1.8years and a portfolio yield of 5.0%; and (2) PIMCO GIS Income Fund, which is a global diversified fund focused on generating income through diversified fixed income sources. Currently, the fund has a duration of 3.5 years and has a yield of 8.1%. We exited Fullerton SGD Income and Nikko AM Shenton Short Term Bond Fund, to fund the above positions and diversify our exposure from Asia to Global Fixed Income.

Going forward, risk assets could remain volatile as the Fed navigates persistent inflation headwinds and rising financial stability risks. As such, we focus on building resilience and quality in the portfolios. Hence, we stay fully invested with a quality bias towards US Treasuries and developed market investment grade corporate bonds.

SaveUp Portfolio Slow n’ Steady
1Q 2023 SGD 0.6%

Figures as of 31 March 2023.
The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.


Over 1Q23, global equity and bond markets made positive returns amid negative news headlines concerning the collapse of Silicon Valley Bank in the US and Credit Suisse’s takeover by UBS. For example, the MSCI All Country Total Return World Index (global equities) returned +7.3% while the Bloomberg Barclays Global Aggregate TR Index (global bonds) returned +3.0%. This was supported by still sound economic data while the market has also started to price in monetary policy easing from the US Fed.

The Global USD digiPortfolios benefited from the global market recovery across most asset classes and enjoyed a strong rebound. The allocation to gold miners also continues to do well as gold prices rallied +8.7% over the quarter. On Fixed Income, we did the right move to increase the fixed income allocation at the end of last quarter, especially the addition to US Treasuries.

Given the strong equity market rebound, we are taking the chance to make some adjustments to the asset allocation. For equities, we trimmed our U.S. equity exposure to increase the allocation to China A shares as we see the recent healthy consolidation in Chinese equities as an opportunity to add. For Fixed Income, we reduced the shorter-duration corporate bond allocation to further increase US Treasuries and extend duration from 4.4 years to ~4.8 years. Given rising recession concerns, we maintain a defensive tilt in the portfolios, staying neutral on equities while increasing our allocation to lower risk assets such as government bonds and investment grade corporate bonds.

Global Portfolio Slow n Steady Comfy Cruisin Fast n Furious
1Q 2023 USD 2.8% 4.7% 5.9%

Figures as of 31 March 2023.
The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.


Along with most developed markets, Asian equities and Singapore bonds saw a rebound over 1Q23, with Asian equities (based on MSCI AC Asia ex. Japan Index) rising by +3.6% and Singapore bonds (based on iBoxx ABF Singapore Total Return Index) rising by +2.1%. In line with our expectations, North Asian markets outperformed ASEAN, although China did see a consolidation over February and gave back some of the gains.

For the Asia SGD digiPortfolios, the move made at the end of last quarter to further cut our Indian equity exposure panned out correctly as Indian equities fell by -6.9% over 1Q23. The move to increase the fixed income allocation also contributed positively. We continue to maintain a sizeable allocation to SG REITs as the segment saw a strong rebound on the back of lower US 10-year US Treasury bond yields. Given rising concerns over slowing economic growth and the US Fed softening its initial hawkish stance, we think that broadly speaking SG REITs could likely stay supported. On the other hand, banks may potentially face net interest margin pressures should interest rates continue to trend lower. As such, we trimmed our position in the Nikko AM Singapore STI ETF given that SG banks constitute almost 48% of the exposure.

Lastly, we maintain our overweight allocation to Chinese equities as we expect earnings growth recovery coupled with still cheap valuations to support further upside potential over the coming months. The removal of Covid-related lockdowns, reopening of the border and resumption of commercial activities in China should likely support China's economic recovery this year.

Asia Portfolio Slow n Steady Comfy Cruisin Fast n Furious
1Q 2023 SGD 0.3% 0.3% 0.3%

Figures as of 31 March 2023.
The above table is based on the Indicative Model Portfolio gross of fees returns. Individual performance may vary.


In 1Q23, both equities and fixed income markets rebounded by 7.3% and 3.0%, respectively, on expectations of a less hawkish US Fed. The market rally was led by growth equities and long-dated government bonds, both responding to the drop in bond yields.

Global Portfolio

During the quarter, we added to Asian equities with favourable view on the region. We also continue to stay invested in quality with funds like BNY Mellon Long-Term Global Equity Fund, which focuses on quality equities and Allianz Global Opportunistic Bond Fund, which maintains large exposure to Developed Market Government Bonds.

Given our diversified allocation to markets, Global Portfolio Comfy Cruisin' returned +3.6% (in USD) and +3.3% (in SGD terms), with all positions contributing positively. Our allocation to quality equities - BNY Mellon Long-Term Equity Fund, added value to our portfolio as quality outperformed value (MSCI World Quality TR Index: +7.4% vs MSCI World Value TR Index: +2.5%) during the quarter. Further, 10-year US-Treasury bond yields trended down further, benefitting our global Fixed Income allocation - Allianz Global Opportunistic Bond Fund and Natixis Loomis Sayles Multisector Income.

Global Portfolio Plus

In 1Q 2023, we reduced our allocation to European and Japanese equities in favour of US and Asian equities. Further, we also switched out position in Chinese equities to a more balanced A- and H-share fund, providing good participation to onshore equities. All the positions contributed positively, however; the consolidation of Chinese equities dragged our performance against market.

That said, Global Portfolio Plus Comfy Cruisin' returned +3.2% (in USD) and +2.6% (in SGD terms), with all positions contributing positively. Our addition to US Equities contributed positively with top performance from Franklin US Opportunities Fund and Natixis Harris US Equity Fund. In Fixed Income, the drop in treasury yields contributed positively to global diversified funds like Allianz Global Opportunistic Bond Fund and Natixis Loomis Sayles Multisector Income.

Looking ahead into 2Q 2023, we maintain an overall neutral stance on equities with a tilt towards Asian equities. We have added to global quality equities and increased our fixed income allocation to an overweight. Within Fixed Income, we continue to focus on quality with a large exposure to US Treasuries and Developed Market Investment Grade corporate bonds. While market volatility may remain high as the Fed navigates through their policy stance, 1Q 2023 was a testament to staying invested in the market. In such an environment, we remain fully engaged with focus on building resilience and quality in our portfolios.

Q1 2023 Slow n Steady Comfy Cruisin Fast n Furious
Global Portfolio SGD 1.8% 3.3% 4.5%
USD 2.1% 3.6% 5.0%
Global Portfolio Plus SGD 1.1% 2.6% 2.8%
USD 1.5% 3.2% 4.3%

Figures as of 31 March 2023.
The above table is based on the Indicative Model Portfolio gross of fees returns and excludes dividends received. Individual performance may vary.

 

Market Insights

Timely articles addressing current market events.

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.


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.


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.

Sign up for DBS NAV Insights, our weekly investment newsletter, to stay updated on views from our experts at the DBS CIO office and DBS Group Research.

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