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FE Advisory Asia Portfolio review – June 2019

The firm's growth portfolio rebounded strongly last month with the help of an emerging markets fund that outperformed all products in the portfolio.

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 June 2019*. Performance figures are in the menu image above.

Luke Ng, FE Advisory Asia

How did the market perform in June?

June saw equity markets rebound from their sell-off in May, thanks to an improving trade situation and more accommodative announcements from central banks. Economic news, however, was largely mixed. The S&P 500 hit new records in the month, thanks to the US announcements suggesting improving trade relations with both China and Mexico. Although there was no cut in interest rates from the Fed in June, they did indicate that cuts are more likely in the future and this further helped to support markets. Consumer and business confidence indices weakened during the month, illustrating how fragile the situation is.

Interestingly, markets were largely unaffected by heightened tensions in the Middle East as relations between the US and Iran deteriorated. The shooting down of a US drone, the announcement that Iran will breach its uranium enrichment limit and the alleged attack on Saudi oil tankers by Iran all left markets unmoved. At one point, President Trump approved attacks on Iran only to pull back at the last moment. Despite the threat of war, markets were unmoved.

Europe was the best performing market. It was a similar story as in the US, with markets boosted by the de-escalation in the US/China trade war and an announcement from the European Central Bank that there would be further monetary policy easing if the inflation outlook did not improve. Japan lagged the US and Europe, with the Bank of Japan leaving monetary policy unchanged. Finally, emerging markets slightly underperformed developed markets, although again they received a boost from the US/China trade talks and a more accommodative announcement from the Fed.

How did the Growth portfolio perform?

The FE growth portfolio rose 5.20% in June in US dollar terms. With a strong focus on quality growth stocks, our holding in JPM Emerging Markets Equity Fund, which did well during the market sell-off in May, continued to outperform throughout the rebound in June and was the top performer in the portfolio. On the other hand, our developed market equity sleeve was less impressive. While our holdings in US equities performed broadly in-line with the respective market, our European and Japanese market exposure lagged the market rebound. Benefiting from the rising oil price amid the heightened tension between the US and Iran, our energy holding also did well in the month.

FE Advisory Asia portfolio performance 

Jan 2019 Feb 2019 Mar 2019 Apr 2019 May 2019 June 2019 YTD
Cautious  3.25% 1.19% 1.00% 1.23% -1.54% 2.77%   8.18%
Balanced 5.51% 1.42% 1.30% 1.81% -1.94% 4.17% 12.83%
Growth  7.36% 2.27% 1.75% 2.74% -3.95% 5.20%  16.05%
Source: FE Advisory Asia. Growth rates in US dollar terms. Data as of 31 June 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.

Part of the Mark Allen Group.