FE Advisory Asia Portfolio review – January 2019

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After negative performance in December and for full year 2018, all three FE portfolios were up in January.

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 impact on the portfolio.

A breakdown of the growth portfolio at the end of January 2018*. Performance figures are in the menu image above.

 

Luke Ng, FE Advisory Asia

 

How did the market perform in January?

Economic data for January was moderate, but following the market sell off at the end of last year, markets rallied on renewed optimism of a solution to the ongoing US China trade tensions. Dovish messages from the Fed proved particularly helpful for emerging markets, which outperformed developed markets thanks to US dollar depreciation.

The US was the strongest performing developed market, but this is perhaps not surprising as it was the one that experienced the biggest sell-off in December. Markets were buoyed by a statement from President Trump confirming a meeting with Chinese President Xi Jinping in February. The development, together with the stimulus action by the Chinese government to repeatedly cut banks’ reserve requirement ratios, also boosted Chinese equities. China ended up as the best performing market in Asia for the month.

Positive headlines on global trade also boosted equities elsewhere. European equities rebounded, with economically-sensitive sectors such as the automotive sector benefiting the most. With hopes growing that a no-deal Brexit will be avoided in March, UK equities also did well and the sterling strengthened.

Despite the dovish messages from the Fed, global government bonds registered positive returns as yields trended lower. But emerging market debt, high yield and corporates performed even better in the month as investor sentiment improved.

How did the growth portfolio perform?

The FE growth portfolio rose 7.36% in January in US dollar terms. Despite going through a market downturn in the last quarter of 2018, we have maintained our call to slightly overweight the risk budget when we rebalanced our portfolio at the end of last November and this has paid off well. The best performing fund in our portfolio was our energy holding, which posted double-digit returns, thanks to the rebound in oil prices. We also topped-up our exposure to emerging market equities via the JPM fund in our last rebalance, and this also boosted our performance as emerging market assets benefited from a weakening US dollar. On the other hand, our Asian equities exposure, acquired via the quality-focused strategy by First State, slightly under-performed the respective market.

 

FE Advisory Asia portfolio performance 

Jan 2019Feb 2019Mar 2019Apr 2019May 2019June 2019YTD
Cautious 3.25%  3.25%
Balanced5.51%5.51%
Growth 7.36% 7.36%
Source: FE Advisory Asia. Growth rates in US dollar terms. Data as of 31 January 2019.

Full year 2018 performance for the FE Advisory portfolios can be viewed here.


*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.
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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