Another Half to Go

At the Half Way Mark

The 1st half of 2022 doesn’t look like it’s going to end much better for the global financial markets than how it started. Putin has not shown any signs of abandoning the attack he initiated on Ukraine. Thousands have lost their lives, with million having been displaced in what the world is calling the biggest war in Europe since the World War II. Putin, instead, refers to it as a move to “demilitarise, and de-Nazify Ukraine”, which has triggered uncertainties on a global scale that unified global financial markets to tumble together and uniformly display a sea of red in returns.

While China started as the poster boy for success in managing the Covid outbreak, its strict “zero covid policy” has led to bigger problems, not only for itself, but its international counterparts as well. The recent 7-week lockdown in Shanghai, the country’s financial hub, had seen the country’s economic activity grinding to a halt. Factories, commercial businesses, as well as its port were left unattended as residents were kept confined to their homes in the government’s bid to avoid a spread. While the lockdown has since been lifted, the move had cast a shadow of doubt on what lies ahead for the Asian giant. Worries over global supply chain constraints remain prevalent, and while backlogged orders are expected to be fulfilled with the easing of the lockdown in the city, concerns are now shifting towards the US, and Europe, who may then face capacity issues with the sudden surge of goods being received.

So will global financial markets finally see some reprise now that the activities are starting to steamroll back to normalcy? As the 1st 5 months of the year has been full of surprises, we still think it best to remain diversified; to take advantage of the heavily sold down and fundamentally strong themes, while maintaining a decent exposure into assets that are able to provide investors with wealth storage (That’s Gold, in case you were wondering).

What’s Red and What’s Not?

After a harrowing 5-months for global equities, commodities are leading the race. Disruption in oil supply, and signs of global economies easing back to normalcy drove oil price to breach the USD 120 per barrel level (which concurrently intensified inflationary concerns). A 66% return in MYR terms put Oil far ahead of the rest of the indices. Precious Gold however, treaded through uncertainties and provided the conservative investors who looked for avenues to safeguard the value of their assets with a 7.3% gain in MYR terms over the period. 

That was the list of what’s not. Now to the list of what’s red. Generally…..most major indices are still in the red in MYR terms YTD up till 9 June 2022.  But with China finally signaling that it is easing its restrictions (on Covid, and its tech sector) after the tech sector suffered from major selloff episodes, will investors take the opportunity to jump back into the market at heavily beaten down prices? China’s tech giants have seen its stock prices climbing steadily higher after China sent signals of easing its crackdown on the sector, lifting the New China sectors faster than the broader market. The S&P New China Sectors ex A Shares Index clawed its way back to display single digit negative returns, while the broader Shanghai Composite, and CSI 300 are still trying to catch up with negative returns of 10.7%, and 15.2% respectively in MYR terms.

Source: Bloomberg as at 10 June 2022. All returns are indicated in MYR terms

Half Full, or Half Empty?  How to Position for the Next Half

In the current market landscape, the market optimists will likely take advantage of lower prices, and increase exposure into beaten down stocks.  What comes down must go back up. Right? On the other extreme, the market pessimists will probably continue hiding in Gold, believing this would be the safest option.

A turn against any of these beliefs would likely lead to heartbreak … and when the use of “in hindsight” by investors spike. Which Is why we continue to advocate diversification when building a long-term investment portfolio. A well-diversified portfolio may hold the potential of attracting comparatively slower returns compared to a concentrated portfolio. But, it also provides investors with a peace of mind as large swings are typically mediated through a larger pool of non-corelated assets.

Whether you are looking for an ETF that can help you retain the value of your assets during more volatile financial market conditions, looking for a high growth strategy, or just want investments that can provide you with a regular income - TradePlus has a strategy for you. With a wide range of ETFs currently being offered on Bursa, the different ETFs will be able to provide you with the diversification needs to build a healthy long-term investment portfolio. 

Snapshot of TradePlus ETFs

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