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FE Advisory Asia Portfolio review – September 2019

All three portfolios rebounded in September and posted positive returns.

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

Luke Ng, FE Advisory Asia

How did the market perform in September?

September was characterised by positive equity markets across the board, although US and emerging markets underperformed Europe, the UK and Japan. Escalating trade tensions seemed to be the driver of this, with the US introducing $300bn of new tariffs on Chinese goods, followed by the announcement that they would be increasing tariffs on a further $250bn worth of goods in October. China responded by announcing tariffs on $75bn of US goods.

Europe witnessed a rotation in September, with sectors that had been out of favour such as financials leading the gains. Previously, performance had been driven by more defensive sectors such as utilities, real estate and consumer discretionary. With global growth fears mounting, the ECB restarted its quantitative easing programme, with the aim of boosting inflation which currently sits at 1% in the eurozone. UK equities had an even stronger run as losing growth momentum prompted expectations of further stimulus from policymakers.

In emerging markets, Latin America and emerging Europe performed better than Asia because they were less exposed to the trade tensions between the US and China. Central banks in the regions including Russia, Turkey, Brazil, Chile and Mexico also took actions to lower interest rates following the cuts of the US Fed and the ECB, hence offering an additional push to their equity markets. On the other hand, it was a challenging month for fixed income as government yields generally rebounded from record lows.

How did the Growth portfolio perform?

The FE growth portfolio rose 1.05% in September in US dollar terms. The BlackRock GF World Energy Fund was the best performing holding in the month as energy stocks were buoyed after oil facilities in Saudi Arabia suffered from a drone attack. On the other hand, our holdings in developed market equities, which primarily held quality growth stocks, generally underperformed as there was a sharp market rotation that drove investment to cheaper and unloved sectors from the relatively expensive stocks. Whereas emerging Europe and Latin America equities had a stronger run in the month, our emerging market equity exposures also lagged as we had a larger exposure in Asian equities, which were more vulnerable to the trade tensions between the US and China.

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%
July 2019 Aug 2019 Sept 2019 Oct 2019 Nov 2019 Dec 2019 YTD**
Cautious 0.79% -1.20% 0.05%   7.78%
Balanced 0.24% -0.80% 0.37% 12.62%
Growth  0.30% -2.70% 1.05%  14.44%
Source: FE Advisory Asia. Growth rates in US dollar terms. *To 30 June 2019. **Data as of 30 September 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: 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.