Market Summary for November 2010
Most of the equity markets were either flat or slightly lower in November compared to a month ago. Earlier in the month, global equities were extending their bullish run-up with several markets such as Malaysia, Indonesia and Thailand (post 1997 crisis) breaching record highs. However, as fears over European debts resurfaced, global markets took a breather. Together with China’s aggressive tightening measures and recent Korea military conflict, markets retracted negatively.
Japan was top performing market
The Nikkei 225 index was the top performing market under our coverage in November. It is a positive surprise that while most markets ended either flat or lower, Japan managed a spectacular 8.0% gain compared to a month ago. This was largely contributed by a better-than-expected 3Q10 GDP growth of 3.9% annualised, which was significantly higher than consensus estimate of an annualised 2.5% growth. On top of that, the Bank of Japan’s intervention in the currency market by selling an estimated 2000 billion Yen may also have helped in the 4.5% depreciation of the yen against USD in November, which is a key boost for exporters.
Europe’s debt woes resurfaced
Ireland was probably the highlight of the month. While initially refusing to turn to the EFSF for financial assistance, they eventually relented as investors effectively shut them off the open market. Yield spread of Irish bonds widened to euro-era high against the German bunds. On 28 November 2010, an 85 billion EUR bailout package has been agreed by EU/IMF while Ireland has put together a new budget that aims to slash spending by a further 6 billion EUR. The Stoxx 600 index fell slightly by 1.6% in November but as the EUR weakens against most other currencies, the loss in SGD terms was a 5.9% decline.
Korea military conflict once again
Tensions in the Korea peninsula erupted as both North and South Korea began firing missiles at one and other. While the two Koreas have a long history of military conflicts, this is the first time artillery bombings took place since 1953. The KOSPI index pulled back after the incident, and coupled with Ireland’s debt problems, the index managed to close only marginally higher by 1.2% in November.
Maintain overweight in equities
Recent market happenings seem déjà vu as earlier this year the same combination of similar market events sent global equity markets tumbling. China’s hiking of bank reserve ratio during the Chinese New Year period, North Korea sinking of South Korea’s army vessel and the well known Greece saga that threatened to break up the Eurozone resulted in the first major correction this year. Markets have recovered and made new grounds since then. While there were negative reactions to the recent events, the reactions were comparatively muted. In fact, most markets rebounded, gaining more than 3.0% within two days into December (as of 2 December 2010 in local currency terms). We continue to believe that equities will do well over the next couple of years and vis-à-vis bonds they appear relatively more attractive. Hence we maintain our overweight position in equities for our portfolios.
|Table 1: Past 6 Months Portfolio Performance
|Rolling 1-year chain-linked performance
|Chain-linked performance since revamp (end Aug 2009)
|Source: iFAST Compilation
Supplementary holdings were key drags
The balanced portfolio was our top performing portfolio even though it managed to gain a mere 0.2%. Bond markets were generally lower as yields rose in November, dragging down the performances of the more risk adverse portfolios. Meanwhile, most of our equity exposures were higher due to the strengthening of USD against the SGD with the exception of our European equity exposure as well as our supplementary holdings. The riskier portfolios were exposed to Korea, China (H-shares) and global financials equity, which did not do well due to the recent events.
Positive returns from all funds
All bond funds were about a percentage lower in November compared to a month ago as yield rose across the board. The worst performing bond fund in our portfolio was PRU Monthly Income Plan Cl A which fell 1.3% while UOB United Glb Emerging Mkts Portfolios S$ held up best among the five, falling by 0.7%. PRU Pan European Fund was our worst performing fund due to the weakening of EUR against the SGD, adding to a total loss of 5.3% in November. Meanwhile UOB United Global Capital Fund fell by 3.7% while HGIF Korean Eqty Fund SGD Cl AD fell by 0.9%. For more details of the fund performance with respect to individual portfolios, please refer to the monthly factsheet of respective recommended portfolios.
Start with $20,000
Investors shall be able to follow the target allocation in Table 2 with S$20,000 starting capital. The research team at iFAST will be providing the portfolio review on a monthly basis at the start of each month.
Latest Portfolio factsheets
The portfolios' factsheets are updated on a monthly basis and links for the most up-to-date factsheets are as provided below:
- Conservative Portfolio
- Moderately Conservative Portfolio
- Balanced Portfolio
- Moderately Aggressive Portfolio
- Aggressive Portfolio
previous months portfolio summary
- September 2010 - FSM Portfolios: Sep was probably the best month for most equity markets in recent times
- August - FSM Portfolios: Equity market volatility evident in portfolio performance
- July 2010 - FSM Portfolios: Risk takers rewarded with bigger winnings
- June 2010 - FSM Portfolio: Supplementary portfolio can be a double edged sword
- May 2010 - FSM Portfolio: Bonds helped preserve portfolio’s capital
- April 2010 - FSM Portfolio: It pays to be safe
- February 2010 - FSM Conservative Portfolio outshines once again
- January 2010 - FSM Recommended Portfolio Review – As of end January 2010
- What China’s Unexpected Rate Hike Tells About Chinese Equities?
- The KOSPI's Resistance Against Conflicts
- Europe: Short term volatility brings new opportunities