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Who moved my investment portfolio?

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

Navigating Investment Opportunities in 2024

2023 was a challenging year for investors, but what’s next? Join our experts as they shed light on the outlook for 2024 and uncover the exciting opportunities that await.

 

 

Shifting Currents

Over Q4 2023, global equities and bond markets staged a strong rebound, supporting by moderating inflation, dovish central bank speak and the drop in bond yields.

Moving into 2024, we expect the tapering of US rates as economic data on growth and inflation continue to soften. This is supportive for bonds, while we remain cautious on equities.

In Q4 2023, global equities (MSCI AC World Index) and global bonds (Bloomberg Global Aggregate Bond Index) returned 11.3% and 8.4% (in USD terms) respectively, supported by moderating inflation, dovish central bank stance and drop in bond yields.

The Income model portfolio (USD-denominated) returned 4.2% based on price returns, as global income equities (MSCI AC World High Dividend Index) rebounded by 7.0%. In addition to price returns, the portfolio also generated an income of around 4.8% p.a. or 1.2% per quarter.

In Q4 2023, our strategic changes around extending duration, increasing allocation to quality equities, and overweighting fixed income securities were fruitful, providing a solid participation in the market rebound. Our top performing holdings were – AB Low Volatility Equity Fund, Fidelity Global Dividend Fund and First Eagle Amundi Income Builder, due to their focus on equities. Fixed income funds also added value by delivering mid-single digit returns.

As of end-December 2023, the portfolio’s allocation is approximately 44% in global equities and 52% in global bonds. Within equities, focus remains on dividend-oriented funds with stable cash flow generation (average dividend yield 2.9%). Our fixed income is targeted towards higher quality investment grade bonds, with an average credit rating of A and a yield to maturity of 6.5%.

Moving into 2024, we expect the tapering of US rates as economic data on growth and inflation continue to soften. This is supportive for bonds, while we remain cautious on equities. Hence, we maintain our sizable allocation to bonds. Additionally, we maintain a bias towards quality and thus, we have sold our exposure to JPM Income fund to consolidate our allocations in PIMCO GIS Income and Schroder Global Credit Income Fund.

Overall, our portfolio focus remains on quality bonds and equities allocation to generate sustainable income.

Income Portfolio Comfy Cruisin’
Q4 2023 SGD 3.1%
USD 4.2%

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


In 4Q23, supportive economic growth data and inflation moderation supported a dovish US Federal Reserve’s stance indicating the end of its interest rate hiking cycle. The 2-year US Treasury bond yields dropped from 5.1% to 4.2% during the quarter, supporting a strong rebound in bond markets. In Asia, the Singapore short term investment grade corporate bonds (iBoxx SGD Investment Grade 1-3 year Index) recorded a 1.8% rise on a total return basis.

The SaveUp model portfolio, delivered a price return of 1.6%, in addition to the consistent income generation in the portfolio of around 3.8% p.a. or 0.95% during the quarter as of the end of 2023. Throughout the year, we diversified our Asian exposure for Developed Market (DM) exposure, adding value to the portfolio.

As of end-November 2023, the portfolio’s model characteristics were as follows: Yield-to-maturity was 5.8%, with a duration of about 2.2 years. It has an average credit rating of A, with high-yield allocation below 10%.

After aligning the portfolio in 4Q 2023, we remain confident in our positioning for the beginning of 2024. Our exposure is split between DM Government Bonds, DM Corporate Bonds, and Emerging Market Bonds.

Key positions include short duration diversified credit funds (DBS CIO Liquid+ Fund, Nikko AM Short Term Bond, Fullerton Short Term Interest Rate Fund), flexible global high-quality bonds (Allianz Global Opportunistic Bond and PIMCO GIS Income Fund), and floating rate fund (Allianz Global Floating Rate Plus Fund). This mix of strategies helps us create a holistic allocation despite our tight risk targets for SaveUp.

Going forward, we expect the tapering of US rates as economic data on growth and inflation continue to soften. This supportive environment for bonds, offers an attractive risk-reward for longer dated fixed income. As witnessed in 4Q 2023, quality short-term fixed income portfolio like SaveUp should provide an expected return higher than fixed deposits or SG T-bills.

SaveUp Portfolio Slow n’ Steady
Q4 2023 SGD 1.6%

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


Over 4Q23, global equities and bond markets staged a strong rebound, returning +11.3% and +8.4% respectively, supported by moderating inflation, dovish central bank speak and the drop in bond yields. As such, the Global ETF Portfolio (USD Comfy Cruisin’) benefited from the market recovery and gained +7.7% (before dividends received) over the quarter.

Within equities, the portfolio’s heavier positioning towards developed market equities such as US and Japan equities contributed positively. While Asian equities, especially China, remained the largest drag, we moderated the portfolio’s Chinese equity exposure by exiting the iShares MSCI China A ETF. For bonds, the shift in positioning done at the beginning of the fourth quarter towards longer duration investment-grade corporate bonds (via adding to iShares USD Corporate Bond ETF and iShares Global Corporate Bond ETF) also contributed positively, as bond yield declines led to price gains. Lastly, with lower real rates and weaker US dollar, gold prices saw a rally, benefiting the portfolio’s gold miner exposure which rebounded by +17% over the quarter.

Looking into 2024, we expect the tapering of US bond yields to continue as US economic and inflation data should likely continue to soften. This could bode well for bonds and alternatives such as gold. Hence, we have increased our allocation to bonds and alternatives (gold miners). In turn, we reduced the equity allocation to an underweight positioning, preferring US equities for quality growth exposure, while maintaining Asian equities as a deep value play.

Global Portfolio Slow n’ Steady Comfy Cruisin’ Fast n’ Furious
Q4 2023 USD 6.6% 7.7% 8.7%

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


In 4Q23, global equities (MSCI AC World Index) and global bonds (Bloomberg Global Aggregate Bond Index) returned 11.3% and 8.4% (in USD terms) respectively, supported by moderating inflation, dovish central bank speak and drop in bond yields.

During the quarter, Global Portfolio Plus Comfy Cruisin’ had a price return (excluding fund dividends received) of 6.7% (in USD) and 5.3% (in SGD), providing strong participation in the market recovery.

Our strategic allocations towards extending duration, increasing quality equities allocations and overweighting fixed income securities came to fruition during the quarter. Top contributors were the US and global quality equity funds – Franklin US Opportunities Fund, BNY Mellon Long-Term Global Equity and AB Low Volatility Equity Portfolio. Asian equities too recovered but underperformed its global peers. Albeit we continue to hold our positions due to the deep value in China with potential rerating in the medium term. Shifting our fixed income allocation from global government bond to high quality credit funds also helped the portfolio.

As of end-December 2023, the portfolio’s allocation was approximately 50% in global equities and 47% in global bonds. Within equities, the focus continues to remain on quality growth equities with stable cash flow generation, and our fixed income is also targeted towards higher quality investment grade bonds, with an average credit rating of BBB, yield-to-maturity of 6.6% and an average duration of 5.4 years.

Looking into 2024, we expect tapering of US rates as economic data on growth and inflation continues to soften. This environment is supportive for bonds whilst we remain cautious on equities. Hence, we have increased our allocation to bonds over equities. Consequently, we added to a couple of bond funds – PIMCO GIS Income Fund, for their expertise in securitized assets and BGF Asian Tiger Bond Fund to reduce the underweight in EM debt. Within equities, we remain selective in quality areas by reducing our allocation in value-oriented strategy – Harris Associates US Value Equity Fund.

Overall, our portfolio focus remains on quality bonds and equities, that can navigate through the high interest rate environment and economic slowdown.

Global Portfolio Plus Slow n’ Steady Comfy Cruisin’ Fast n’ Furious
Q4 2023 SGD 4.9% 5.3% 5.2%
USD 5.7% 6.7% 7.1%

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


Over Q4 2023, rate-sensitive assets such as REITs and bonds stagged a strong rebound on the back of moderating inflation, dovish central bank speak and the drop in bond yields. However, Chinese equities continued to struggle given the lack of positive catalysts. As such, the Asia ETF Portfolio (SGD Comfy Crusin) returned 1.9% (excluding dividends) over the last quarter.

Within equities, the portfolio’s largest allocation is in Asian REITs which contributed positively, as cheap valuations coupled with lower interest rates led to a strong rerating of the sector. The portfolio action done in the beginning of the fourth quarter to moderate China equity allocation (via reducing the Xtrackers MSCI China ETF) and to increase India equity allocation (via adding to the iShares MSCI India Climate Transition ETF) also contributed positively. For bonds, the shift to overweight bonds and extend duration also worked out well.

Looking into 2024, we expect the tapering of bond yields to continue as global economic and inflation data should likely continue to soften. This should bode well for bonds, which we continue to maintain an overweight allocation. For equities, we continue to moderate our China equity exposure, and gradually increase our India equity allocation. We expect India equities to see resilient earnings growth, while China equities serve as a deep value play in the portfolios. We maintain the portfolio’s allocation in REITs as reasonable valuations, attractive yield of ~6% coupled with expected interest rate cuts should continue to support rerating of this segment over the year.

Asia Portfolio Slow n’ Steady Comfy Cruisin’ Fast n’ Furious
Q4 2023 SGD 3.0% 1.9% 1.1%

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


In 4Q23, global equities (MSCI AC World Index) and global bonds (Bloomberg Global Aggregate Bond Index) returned 11.3% and 8.4% (in USD terms) respectively, supported by moderating inflation, dovish central bank speak and drop in bond yields.

Global Portfolio

During the quarter, Global Portfolio Comfy Cruisin’ had a price return (excluding fund dividends received) of 7.2% (in USD) and 5.6% (in SGD), providing strong participation in market recovery.

Our strategic allocations towards extending duration, increasing allocation into quality equities, and overweighting fixed income securities came to fruition during the quarter. Top contributors were the quality growth holdings in BNY Mellon Long-Term Global Equity and AB Low Volatility Equity Fund. Asian equities too recovered, but underperformed its global peers, albeit we continue to hold our positions due to the deep value in China with potential rerating in the medium term. Shifting allocation from global government bond to broader flexible fixed income strategy also helped the portfolio to better participate in the market rally.

As of end-December 2023, the portfolio’s allocation was approximately 50% in global equities and 47% in global bonds. Within equities, the focus continues to remain on quality growth equities with stable cash flow generation. Our fixed income allocation is also targeted towards higher quality investment grade bonds, with an average credit rating of A, yield-to-maturity of 6.8% and an average duration of 5.1 years.

Looking into 2024, we expect a tapering of US rates as economic data on growth and inflation continue to soften. This environment is supportive for bonds whilst we remain cautious on equities. Hence, we have increased our allocation to bonds over equities. Consequently, we added the Schroder Global Credit Income Fund to the portfolio, while reducing weight on AB Low Volatility Equity and FSSA Dividend Advantage Fund. Overall, our portfolio focus remains on quality bonds and equities, that can navigate through the high interest rate environment and economic slowdown.

Global Portfolio Plus

During the quarter, Global Portfolio Plus Comfy Cruisin’ had a price return (excluding fund dividends received) of 6.7% (in USD) and 5.3% (in SGD), providing strong participation in the market recovery.

Our strategic allocations towards extending duration, increasing allocation in quality equities and overweighting fixed income securities came to fruition during the quarter. Top contributors were the US and global quality equity funds – Franklin US Opportunities Fund, BNY Mellon Long-Term Global Equity and AB Low Volatility Equity Portfolio. Asian equities too recovered but underperformed its global peers. Albeit we continue to hold our positions due to the deep value in China with potential rerating in the medium term. Shifting our fixed income allocation from global government bond to high quality credit funds also helped the portfolio.

As of end-December 2023, the portfolio’s allocation was approximately 50% in global equities and 47% in global bonds. Within equities, the focus continues to remain on quality growth equities with stable cash flow generation, and our fixed income is also targeted towards higher quality investment grade bonds, with an average credit rating of BBB, yield-to-maturity of 6.6% and an average duration of 5.4 years.

Looking into 2024, we expect the tapering of US rates as economic data on growth and inflation continue to soften. This environment is supportive for bonds whilst we remain cautious on equities. Hence, we have increased our allocation to bonds over equities. Consequently, we added to a couple of bond funds – PIMCO GIS Income Fund, for their expertise in securitized assets and BGF Asian Tiger Bond Fund to reduce the underweight in EM debt. Within equities, we remain selective in quality areas by reducing our allocation in value-oriented strategy – Harris Associates US Value Equity Fund. Overall, our portfolio focus remains on quality bonds and equities, that can navigate through the high interest rate environment and economic slowdown.

Q4 2023 Slow n Steady Comfy Cruisin Fast n Furious
Global Portfolio SGD 4.7% 5.6% 6.0%
USD 5.8% 7.2% 8.2%
Global Portfolio Plus SGD 4.9% 5.3% 5.2%
USD 5.7% 6.7% 7.1%

Figures as of 31 December 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.

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.


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.

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