Weekly Commentary: 12 June 2023 – 18 June 2023
Markets in the Asia-Pacific region are showing varied performance as traders come off a successful week and anticipate major upcoming central bank meetings. The United States Federal Open Market Committee (FOMC) is set to meet on June 13-14, the European Central Bank is slated for a meeting on Thursday, and the Bank of Japan will wrap up its meeting on Friday.
In Japan, the Nikkei 225 began with a 0.45% rise, remaining near its highest point in 33 years, while the Topix Index also increased by 0.48%. Markets in South Korea kicked off positively too, with the Kospi increasing by 0.32% and the Kosdaq rising by 0.2%. Conversely, the futures for Hong Kong’s Hang Seng index indicate a potential dip at the opening, standing at 19,340 against the HSI’s last closing at 19,389.95. Meanwhile, markets in Australia are closed due to a holiday.
Stock returns were mixed over the week as observed across the following 3 indices, with the Dow Jones Industrial Average (+0.13%), S&P 500 Index (+0.11%), and NASDAQ Composite Index (+0.16%). Other notable key market indices that generated positive returns consist of the Hang Seng Index (+2.68%) and the MSCI Singapore Free Index (+1.82%). Three S&P 500 sectors registered positive returns last week – Consumer Discretionary (+2.45%), Utilities (+1.96%), and Energy (+1.78%). The main underperformers for the week were from subsectors such as Consumer Staples (-0.50%), Information Technology (-0.66%), and Communication Services (-0.41%). 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 -0.86%. driven by U.S 2-year and 10-year Treasury yields rising 11bps to 4.61% and 6bps to 3.75% respectively. Market sentiment also became more risk-off as the U.S. High Yield (HY) – Investment Grade (IG) credit spread tightened 12 bps to 2.78% while the CBOE Volatility Index (VIX) fell 77 bps to 13.83%.
The global REIT market’s return varied across numerous benchmarks. S&P/ASX 200 A-REIT Index (-2.85%), and FTSE EPRA Nareit UK REITs Index (-1.83%) were the notable REITs that generated negative returns over the past week. Closer to home, the iEdge S-REIT Index (-0.41%) and all of its subsectors generated negative weekly returns except Healthcare (+0.5%), 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.
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