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 Cautious portfolio at the end of June 2018.* Performance figures are in the menu image above.
Data: FE Advisory Asia
Luke Ng, FE Advisory Asia
How did the market perform in June?
June was generally a tough month for equity investors, with most markets posting a negative return. US equities proved the best performing market among developed equities, thanks to the resilient job, manufacturing and consumer confidence figures. While the US Fed announced an increase in interest rates by 0.25% in the month, in the same week the market also saw a rise in trade war rhetoric, helping send global equities lower. European and Japanese equities, and in particular the automakers, were hit amid fears over possible tariffs which could be imposed by the US.
Emerging market equities were hit even harder as trade concerns escalated, this coinciding with the strengthening in the US dollar, which placed further pressure on these markets. While China was under the spotlight amid the bilateral trade disputes with the US, other Asian economies were also impacted due to their participation in China’s supply chain. Not surprisingly, Asia-Pacific equities ended up lower than regional peers in emerging Europe and Latin America during the month.
Fixed income also fell alongside equities in June, with sovereign investments generally underperforming corporates and high yield. Overall, the Bloomberg Barclays Global Aggregate fell 0.44% in US dollar terms for the month.
How did the cautious portfolio perform?
The cautious portfolio fell 0.52% in June in US dollar terms. Our portfolio was rebalanced at the end of May, and the moves we undertook improved our performance in June — otherwise, the portfolio would have fallen by over 1%. The key move we made in the fixed income sleeve was to reduce our duration risk by switching some of our holdings into a shorter duration strategy, and this fund marginally gained by 0.12%, which turned out to be the best performing fund in our portfolio.
In fact, most of the fixed income strategies we held performed well in the month and outperformed the Bloomberg Barclays Global Aggregate, except our emerging market exposure with Templeton,which continued to suffer from the weakness of the sub-asset class. Increasing US equity exposure through a new position with Legg Mason also contributed positively, as the US was the best performing equity market in June. In addition, our other equity holdings, including First State Asia Opportunities, also weathered well in the downmarket, thanks to a core focus on high quality stocks.
FE Advisory Asia portfolio performance
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