Skip to main content
Weekly Outlook

Weekly Outlook 05 June 2023 – 11 June 2023

Weekly Commentary: 05 June 2023 – 11 June 2023

Markets across the Asia-Pacific region are primarily showing a positive trend after U.S. President Joe Biden enacted a law to raise the debt ceiling, thus preventing the United States from failing to meet its financial commitments over the weekend. The debt ceiling bill, a result of bipartisan compromise, was approved in the Senate with a 63-36 vote on Thursday evening, garnering enough support from both sides to surpass the 60-vote requirement to prevent a filibuster. On Wednesday, it cleared the House after approximately 72 hours, with a voting margin of 314–117.

In Japan, the Nikkei 225 index made further gains, outperforming other global indexes for the month of May with a rise of 0.97%, while the Topix index started 1.16% higher. Investors will be closely watching for the Nikkei 225 to reach the 32,644 mark, which would represent its highest level since July 1990.

The South Korean Kospi index slightly increased by 0.44%, while the Kosdaq index showed a minor decline. The Australian S&P/ASX 200 index was 0.99% higher, with investors keenly awaiting the upcoming central bank rate decision.

Oil futures saw a significant increase following the decision by Saudi Arabia, a leading member of the Organization of the Petroleum Exporting Countries (OPEC), to further reduce oil production by one million barrels per day. Brent crude oil prices increased by 2.35% to $77.94, while West Texas Intermediate oil prices rose by 2.43% to $72.48.

In the U.S. on the past Friday, all three primary indices increased by more than 1%. The Dow Jones Industrial Average experienced a substantial leap of 2.12%, marking its best day since January. The S&P 500 saw a growth of 1.45%, and the Nasdaq Composite went up by 1.07%, achieving its highest level since April 2022 during the trading session. As for notable upcoming financial events, the next FOMC meeting is set for June 13-14.

Stock returns were mixed over the week as observed across the following 3 indices, with the Dow Jones Industrial Average (-0.97%), S&P 500 Index (+0.35%), NASDAQ Composite Index (+2.52%). Other key market indices that generated positives returns consist of STI Index (+1.27%) only. 3 S&P 500 sectors registered positive returns last week – Information Technology (+5.12%), Consumer Discretionary (+0.37%) and Communication Services (+1.20%). Main underperformers for the week were from subsectors such as Consumer Staples (-3.21%), Health Care (-2.86%) and Materials (-3.06%). For 2022 as a whole, index returns were negative for the Dow Jones Industrial Average (-8.78%), S&P 500 (-19.44%) and the NASDAQ Composite (-33.10%).

The yield-curve remains inverted as the 10Y-2Y US Treasury spread widened to -0.82%. driven by U.S 2-year and 10-year Treasury yields falling 2bps to 4.54% and falling 8bps to 3.72% respectively. Market sentiment also became more risk-on as the U.S. High Yield (HY) – Investment Grade (IG) credit spread tightened 19 bps to 2.90% while the CBOE Volatility Index (VIX) has fallen 335 bps to 14.60%.

This coming week, there will be an update about China’s inflation status, final GDP revisions from the EU and Japan.

The global REIT market’s return was varied across the numerous benchmarks Thailand Property Fund & REITs Index (-0.19%) and Hang Seng REIT Index (-1.20%) were the notable REITs that generated negative returns over the past week. Closer to home, the iEdge S-REIT Index (+0.03%) and all of its subsectors generated positive weekly returns with Retail (+0.15%), the notable sector that outperformed the rest last week.  REITs generally have been affected by decreasing yield spread as interest rates surged and investors price in the possibility of reduced distributions stemming from higher financing costs. However, we do expect inflows to return to the sector given the existing attractive valuations on offer and resilience offered by the REIT asset class in light of the waning global growth outlook.

Globally, REIT is also the best inflation-adjusted asset classes for the past 20 years. US-REIT dividend growth have outpaced annual inflation rate as measured by the Consumer Price Index except in 2002 and 2009 (shortly after the GFC). In Singapore, the iEdge S-REIT Index has returned 4.51% annualized for the past ten years in contrast to the average core inflation rate of 1.51%, and outperforming the STI’s 3.66%.

Important Information

This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.

Investments are subject to investment risks including the possible loss of the principal amount invested, and are not obligations of, deposits in, guaranteed or insured by PCM or any of its subsidiaries, associates, affiliates or PDs. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved. Any use of financial derivative instruments will be for hedging and/or for efficient portfolio management. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products. The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. This advertisement has not been reviewed by the Monetary Authority of Singapore.

Leave a Reply