WITH market volatility such as central bank tightening, economic slowdown and geopolitical conflict on investors' minds, Principal Malaysia sees growth opportunities in Asia with the sector earnings poised for a rerate against China’s rapid economic reopening.
Principal finds that the reopening of China would contribute to the dynamics of the global economy, while adding to the attractiveness of Asia.
It is said that escalating political tension between China and the US has driven many multinational companies to relocate their manufacturing hubs to Vietnam, Thailand, Malaysia and Indonesia, bringing in the greenback in foreign direct investment (FDI), and positioning the region as a self-contained supply chain hub of electric vehicle (EV) batteries, electrical and electronics or rubber-based manufacturing among others.
Principal’s investment team also noted that currently, China offers good investment prospects as valuations are cheap, while investors wanting to diversify their portfolio can venture into the Asia and Asean region for equities and the fixed-income market.
Principal's advice for investors
While there are many ways to invest, Principal has prepared the recommended funds based on your risk appetite:
> For the risk-averse investor: Principal suggests focusing on defensive investment strategies with safer options – such as fixed-income funds like bonds or money market funds – under particularly challenging economic conditions. To outride market volatility, the recommended funds include Principal Lifetime Bond, Principal Islamic Money Market Fund or Principal Islamic Lifetime Sukuk.
> For moderately aggressive investors: For a combination of growth and income, recommended funds such as Principal Asia Pacific Dynamic Mix Asset Fund provide exposure to Asia and income across the region. Principal Asia Pacific Dynamic Mix Asset Fund is a fund with a combination of equities and fixed-income exposure within the Asia Pacific.
> For investors with a higher risk appetite: China offers good investment prospects currently as the valuations are cheap, as the government pushes to reflate its economy when the global market is starting to slow down. Principal offers exposure to this high-potential market with the Principal Greater China Equity Fund.
> For investors who want diversified exposure: Asia and Asean countries can also be a choice with Principal Asia Pacific Dynamic Income and Asean Dynamic Fund – the flagship fund for Asia and the Asean region.
Source: Lipper as of Dec 31, 2022
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