Monthly Market Review

Economics

Lim Yuin, Chief Investment Strategist

Equities

Source: All data are sourced from Lion Global Investors and Bloomberg as at 31 March 2023 unless otherwise stated. *All figures stated in US Dollars.

Fixed Income

Source: All data are sourced from Lion Global Investors and Bloomberg as at 31 March 2023 unless otherwise stated. *All figures stated in US Dollars.

Macro & Markets

Inflation versus Growth

Despite the banking turmoil, the US Federal Reserve (Fed) and European Central Bank (ECB) raised interest rates by 25 basis points and 50 basis points respectively in their battle against inflation.
The impact of bank stresses on the economy would likely be through tighter bank lending standards. This is likely to be a drag on economic growth, increasing the risk of recession in 2H2023 for both US and Europe.
On the back of growth concerns and fragile investors’ confidence, we prefer shorter duration, high quality (investment grade) bonds.

China’s Decoupling from the West

While China announced a conservative gross domestic product (GDP) growth target of around 5% during the National People’s Congress (NPC) meetings, we believe policymakers are taking a pragmatic approach towards achieving sustainable and high quality growth.
We are encouraged by recent data on the property and consumption sector. In addition, China has more policy levers to pull to achieve their growth target despite recent macro uncertainities.
The recent banking sector challenges in the US and Europe have little direct impact on the Chinese financial system. Furthemore, the growth differential versus its Western counterparts and undemanding valuations put China equities at an advantage on a risk-rewards basis.

Movers & Shakers

Does the bank failures in US and Europe portend the start of a banking crisis?

The collapse of Silicon Valley Bank (SVB) and Signature Bank, alongside takeover of Credit Suisse compelled financial regulators across both continents to react quickly and decisively to prevent further contagion which could lead to a financial crisis. The risk of further contagion and systematic banking sector is low for now.

Japanese Trade Union Confederation successfully asked for highest wage hike in 30 years.

Bank of Japan may not declare the war on deflation over with one year of high wage increase, but the case can be made for Governor Ueda to at least consider tweaking the Yield Curve Control policy in June this year.

TikTok CEO Faced nearly 6 hours of heated hearing before US Congress

Unlikely that TikTok could provide a satisfactory arrangement to allay the security fears of the US government. A broader implication could be further escalation in the technology war between the US and China.

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