FE Advisory Asia Portfolio review – August 2017

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FE Advisory Asia’s growth portfolio was up in August, driven by an emerging Europe fund.

Each month we feature the allocation in one of the three portfolios offered by FE Advisory Asia: cautious, balanced and growth. Data is included to show how well the portfolio has done compared to the previous month and year-to-date so that readers can get a sense of performance.

Additionally, Luke Ng, senior VP of research at FE Advisory Asia, provides a concise analysis on macro events and their potential impact on the portfolio.

 

A breakdown of the growth portfolio at the end of August 2017. Performance figures are in the menu image above.

 

Portfolio breakdown and holdings are based on latest published data for each constituent, which may have publication dates that differ.
Percentages are based on current holdings and should only be used as a guide. Some information is provided to FE from independent third parties whom FE does not control. FE cannot guarantee the accuracy or reliability of the data, or its suitability for use by all investors.

 

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Luke Ng, senior VP of research

 

How did the market perform in August?

The markets encountered some conflict in August as escalating tensions on the Korean peninsula combined with the devastation caused by Hurricane Harvey contrasted with the generally positive economic data. In the end, the economic data won with most markets ending the month in slightly positive territory.

The US saw an upward revision of up to 3% annualised in its second quarter GDP growth figures. This was primarily down to a surprise increase in personal consumption data which proved particularly beneficial for the IT sector. The sector that really suffered during the month was the energy sector due to the impact of Hurricane Harvey. In Europe, the market traded sideways as positive PMI and quarterly GDP growth figures raised expectations of a further tapering in the quantitative easing by the European Central Bank. Japan was also a mixed bag as stronger than expected GDP and consumption growth were seen, but at the same time inflation remained subdued.

In emerging Asia, China led the gains amid continued improvement in the industrial production and domestic consumption numbers. At the other end, South Korea was impacted inevitably by the political tension in the Korean peninsula. The conviction of J Y Lee of Samsung also weighed on market sentiment.

With rising tensions between the US and North Korea, August saw a flight to safety. Fixed income benefitted as a whole, with governments and investment grade instruments outperforming corporates and high yield, respectively.

How did the growth portfolio perform?

Our growth portfolio gained 1.69% in August, and 13.71% for year-to-August in US dollar terms. It outperformed both the MSCI World and Bloomberg Barclays Global Aggregate indices in the month, which grew 0.19% and 0.99% respectively. The top performing fund of our portfolio was Schroder ISF Emerging Europe, which benefitted from the robust earnings and economic data coming out of the region. Mild inflation figures also boosted sentiment in Russia because it gives more leeway for the central bank to opt for an additional rate cut.

Aside from our emerging Europe equities exposure, our allocation and selection in Asia added value over the month. Thanks to the strong run by Chinese equites, our holdings in a China dividend- focused strategy proved beneficial amidst this growth-led rally.  Nevertheless, our position with the JPMorgan Japan (Yen) Fund did well and grew 2.53%. It significantly outperformed MSCI Japan, which slightly declined in US dollar terms. Our only holding in the energy sector, held for diversification purposes, was not immune to the impact of Hurricane Harvey and proved the only portfolio exposure that posted a negative return.


 

FE Advisory Asia 2017 portfolio results 

JanFebMarAprMayJunFirst half of 2017
 Cautious0.78%1.28%0.77%0.71%1.05%0.44%5.15%
 Balanced2.03%0.78%0.19%1.23%1.85%0.44%6.69%
 Growth2.57%2.00%0.53%1.19%2.81%0.17%9.61%

 

JulAugYTD
 Cautious0.68%1.16%7.09%
 Balanced1.11%1.40%9.39%
 Growth2.01%1.69%13.71%
 Source: FE Advisory Asia. Growth rates in US dollar terms. YTD to end of August 2017.

 


FE Advisory Asia has designed the portfolios to target specific risk levels of cautious, with a target annualised portfolio volatility of 4%, balanced (7%) and growth (10%). They are rebalanced twice per year, typically in May and December.
The portfolios are managed using a proprietary optimisation system with strategic asset allocation insights from AKG to complement the shorter-term tactical asset allocation decisions made by FE’s research team.
The portfolios typically comprise eight funds chosen from the FE Advisory top 100 list of funds spanning all asset classes and sectors from the Hong Kong SFC-authorised fund universe.

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