Weekly Market Review
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A BRIEF ON GLOBAL & LOCAL MARKETS, INVESTMENT STRATEGY.
WEEK IN REVIEW | 13 – 17 MARCH 2023

  • Global Equities Soar amidst Credit Suisse Crisis

    Global equities climbed higher as investors heaved a sigh of relief over a collective policy response by central banks to shore up liquidity and prevent the collapse of Credit Suisse. The S&P 500 index rose 1.40%, while the tech-heavy Nasdaq gauge vaulted 4.40% last week.

    Beset by a string of financial and regulatory concerns, Credit Suisse has been ensnared by a crisis of confidence in the wake of upheavals in the US banking sector. After some delay, the Swiss lender released its annual report last week where the bank stated that it had identified "material weaknesses" in controls over financial reporting and had not yet stemmed customer outflows.

    One of its largest shareholder, Saudi National Bank also said it did not plan to inject any more fresh capital into the bank as it was constrained by regulatory hurdles. This culminated in a perfect storm for Credit Suisse that led to a flight in deposits as well as a massive sell-down of its equities and bonds.

    However, investors’ fears were quickly assuaged as Swiss regulators orchestrated a rescue merger between UBS and Credit Suisse to prevent the latter’s collapse. According to Reuters, UBS will buy rival Swiss bank Credit Suisse for US$3.23 billion and agreed to assume up to US$5.4 billion in losses as it winds down the smaller peer's investment bank.

    In a coordinated global response, central banks including the US Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of Japan (BoJ) also said they would also enhance dollar swap lines to shore up liquidity.

    As recessionary fears become heightened, there are increased bets that the Fed may consider a pause in rate hikes when it meets this week at its FOMC meeting. US Treasury yields fell with the benchmark 10-year retreating to 3.40%.

    In Asia, the broader MSCI Asia ex-Japan index was modestly higher at 0.90%. In a surprise move, the People’s Bank of China (PBOC) said it would cut the reserve requirement ratio (RRR) for all banks, except those that have implemented a 5% reserve ratio, by 25 basis points (bps), effective March 27.

    There were no major portfolio action last week as we took a wait-and-see approach until there was clearer visibility on the outlook. While the US could see a slowdown in economic growth as banks grow more cautious of lending, we could see the limelight shift to Asia which could pull fund flows into the region. Tailwinds from China’s reopening and a weaker US dollar could also provide an additional lift to Asia’s recovery which would be supportive for equities.
  • Updates on Malaysia

    On the domestic front, the benchmark KLCI closed 1.50% lower as investors stay on the side-lines due to weak sentiment. While the banking sector turmoil in the US and Europe will continue to ripple throughout the region, we don’t see any similar risk in Malaysia’s banking system.

    The investment and trading books of Malaysian banks on average typically only make up 20% of the bank’s asset base. This pales in comparison to Silicon Valley Bank (SVB) which made up 57% of its asset base. In terms of interest rate increases, Malaysia’s Overnight Policy Rate (OPR) has only risen 100 bps compared to 450 bps in the US.

    On notables moves in the market, the glove sector was one of the top winners last week led by gains in Top Glove which sounded bullish on its prospects, despite reporting losses for the quarter. In its earnings briefing, the management expects its margins to recover driven by a lower cost-base as well as an expected increase average selling prices (ASPs). We added tactical position in names for selected funds given light positioning in the sector.

    On portfolio action, we participated in the listing of Oppstar which staged a strong debut on the ACE Market where its share price soared by over 267%. As its share price exceeded its fair value, we took the opportunity to also lock-in gains for selected funds which managed to obtain an allocation in the IPO. We continue to add exposure in the healthcare as well as tech and electronics manufacturing service (EMS) space that is expected to benefit from the trade divergence themes.
  • Fixed Income Updates & Positioning

    The Asia credit space succumbed to weakness as Credit Suisse’s banking turmoil unfolded. The Asia Investment Grade (IG) space widened by 11 bps to 177 bps translating to a yield of 5.17%. In the Asia High Yield (HY) space, credit spreads widened by 74 bps. On fund flows, the Emerging Market (EM) bond funds continued to bleed with an outflow of USD 3.2 billion in the prior week.

    Over the weekend, FINMA has announced its approval for the takeover of Credit Suisse Group by UBS Group. The Credit Suisse Group is experiencing a crisis of confidence, which has resulted in considerable outflows of deposits. This was intensified by the upheavals in the US banking market over the past 2 weeks. There was a risk of the bank becoming illiquid, even if it remained solvent, and the regulators deemed it necessary to act to prevent serious damage to the Swiss and international financial markets.

    Against a backdrop of volatility in the credit market, we will adopt a defensive stance and raise cash levels our portfolios.

    In the domestic fixed income space, Malaysia saw an overall risk-off week with thin trading. On a week-to-week basis, the MGS yield closed with the longer tenure MGS moving lower by 2 – 6 bps, apart from 30-year MGS which moved higher by 4 bps. In terms of government bond issuances, there was the opening of the 7-year GII for September 2030. The bid-to-cover ratio was lower than expected at 1.586x with average yield of 3.79%. Upcoming auction would be the 30-year MGS for March 2053 with an estimated issuance of RM5 billion, inclusive of private placements.

    In the Corporate Private Debt Securities (PDS) market, there was a primary issuance for YTL Power with ratings of AA1. The issuance was RM1.5 billion with four tenures of 3-year, 6-year, 7-year, and 10-year. Upcoming issuances include TNB Power Generation and YTL Corporation.

    In terms of portfolio action, we participated in the YTL Power issuance. In line with the global market sentiments, we will be cautious and defensive moving forward. Cash levels hover around 7 – 8%.`

This content has been prepared by AHAM Asset Management Berhad (formerly known as Affin Hwang Asset Management Berhad) (hereinafter referred to as “AHAM Capital”) specific for its use, a specific target audience, and for discussion purposes only. All information contained within this presentation belongs to AHAM Capital and may not be copied, distributed or otherwise disseminated in whole or in part without written consent of AHAM Capital.

The information contained in this presentation may include, but is not limited to opinions, analysis, forecasts, projections and expectations (collectively referred to as “Opinions”). Such information has been obtained from various sources including those in the public domain, are merely expressions of belief. Although this presentation has been prepared on the basis of information and/or Opinions that are believed to be correct at the time the presentation was prepared, AHAM Capital makes no expressed or implied warranty as to the accuracy and completeness of any such information and/or Opinions.

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TENG CHEE WAI

Managing Director
Teng Chee Wai is the founder of Affin Hwang Asset Management Berhad (Affin Hwang AM). Over the past decade, he has built the Company to be the fastest growing and only independent investment management house in Malaysia’s top three, with an excess of RM47 billion in assets under management as at 31 December 2018.​

​In his capacity as Managing Director / Executive Director, Teng manages the overall business and strategic direction as well as the management of the investment team. His hands-on approach sees him actively involved in investments, product development and marketing. Teng’s critical leadership and regular participation in reviewing and assessing strategies and performance has been pivotal in allowing the Company to successfully navigate the economically turbulent decade.

Teng’s investment management experience spans more than 20 years, and his key area of expertise is in managing absolute return mandates for insurance assets and investment-linked funds in both Singapore and Malaysia. Prior to his current appointments, he was the Assistant General Manager (Investment) of Overseas Assurance Corporation (OAC) and was responsible for the investment function of the Group Overseas Assurance Corporation Ltd.​

​Teng began his career in the financial industry as an Investment Manager with NTUC Income, Singapore. He is a Bachelor of Science graduate from the National University of Singapore and has a Post-Graduate Diploma in Actuarial Studies from City University in London.
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