The Sub-Fund's investment objective, over a recommended investment period of more than 5 years, is to grow net asset value by investing in companies registered predominantly in Asean Countries.
Market declines and foreign fund selling accelerated in June Persistent market weakness over the past five months reflect an accumulation of growth fears from tighter financial conditions and US-China trade protectionism. The market drawdown since January is approaching the 20% bear market threshold and leading indicator of economic recession. Yet the economic impact from higher interest rates and trade protectionism is not expected to exceed 1% from the current 8% nominal GDP growth forecast. The stock market should be close to bottoming since the majority of portfolio de-risking and capital outflow has been executed while market valuations are close to historical lows. However, market direction in 2H18 is likely to be range-bound with rebounds capped at 15% as multiple expansion is obstructed by ongoing concerns over macro growth risks. Fund underperformance was caused by overweighting Singapore and Indonesian bank and property stocks. Macro-driven capital outflow compromised the fund's bottom-up approach to generate alpha. Indiscriminate fund selling should have already peaked allowing for stock differentiation and fund alpha in 2H18. Fund cash reserves were deployed to raise the Philippines from underweight to overweight. Similar to Indonesia last month, capital markets weakness in the Philippines have priced-in liquidity tightening from USD appreciation and higher interest rates. Banks and conglomerate stocks were bought as valuations declined to historical lows while corporate profitability has not been impacted by weak capital markets
(1) The rating grades the funds on a scale from 1 to 7. This rating system is based on the average fluctuations of the net asset value over the past five years. It corresponds to the variation range of the portfolio upwards and downwards. If the net asset value is less than 5 years old, the rating is determined by other regulatory calculation methods. Historical data such as those used to calculate the rating may not be a reliable indication of the future risk profile. The current category is neither a guarantee nor an objective. Category 1 does not signify a risk-free investment.