Editorial

I welcome you to explore the individual, diverse parts with their own narratives even as we help you piece them together to see the big picture of a world in transition. This big-picture perspective is essential for making sense of the overall investment outlook – so you can position your portfolio to capture the right opportunities at the right time. – Abel Lim

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Asset Class Review

Equities delivered strong returns in H1 2021 amid the global economic recovery, with a global rotation into value sectors. However, bond prices dropped as longer-term yields rose on the back of inflation concerns and expectations of higher rates. Rising bond yields have also led to a strengthening USD and a fall in gold prices, which subsequently rebounded, coinciding with higher volatility in cryptocurrencies.

Equities Fixed Income Currencies And Commodities

Tactical Calls Review

Our leading high conviction call, US Financials, gained from higher longer-term interest rates and lower bad loan provisions. We initiated a new call on US Consumer Discretionary equities – which will benefit from economic reopening – and closed our call on US Consumer Staples as defensive sectors become less appealing. The US market and Sustainability remain our top Megatrend ideas.

Open Calls Closed Calls

Macro Outlook for H2 2021

The global economy has bounced back sharply from a historic contraction caused by COVID-19. Economies which led the recovery in 2020 are likely to grow more moderately in H2 2021 while those that are still struggling from the pandemic will take a longer time to recover.

Progress on vaccinations is instrumental to economic reopening. Countries with faster vaccine rollouts have recovered more quickly and have seen a rise in consumer spending arising from pent-up demand.

Read More Key Drivers and Risks Key Events Calendar

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Our Views and Strategies

Our award-winning VTAR framework focuses on analysing large volumes of financial data in the four components of Value, Trend, Activity and Risk (VTAR). This framework provides a holistic view of financial markets and identifies investment opportunities across asset classes, sectors, geographical regions, and time periods. The UOB Personal Financial Services Investment Committee examines these insights, in tandem with key risks, and comes to a consensus to determine the attractiveness of each potential investment idea.

Purpose

Identifying investments with attractive valuations and earnings potential.

Common Indicators
  • Price-to-Earnings Ratio (P/E Ratio)
  • Earnings Growth (EPS Growth)
  • Option-Adjusted Spreads (OAS)
Purpose

Understanding the trend of the investment.

Common indicators
  • Simple Moving Averages (MAs)
  • Relative Strength Indicator (RSI)
  • Fund flows
Purpose

Understanding the macro environment and business activities that may affect performance.

Common indicators
  • Central bank policies
  • Composite Purchasing Managers Index (PMI)
  • Industrial Production (IP) and Retail Sales
Purpose

Identifying key markets risks and potential mitigating factors.

Common indicators
  • Geopolitical events
  • Industry- or region-specific events
  • News flows

Using VTAR to identify ideas

Our award-winning VTAR framework focuses on analysing large volumes of financial data in the four components of Value, Trend, Activity and Risk (VTAR). This framework provides a holistic view of financial markets and identifies investment opportunities across asset classes, sectors, geographical regions, and time periods. The UOB Personal Financial Services Investment Committee examines these insights, in tandem with key risks, and comes to a consensus to determine the attractiveness of each potential investment idea.

Value


Purpose

Identifying investments with attractive valuations and earnings potential.

Common Indicators
  • Price-to-Earnings Ratio (P/E Ratio)
  • Earnings Growth (EPS Growth)
  • Option-Adjusted Spreads (OAS)

Using VTAR to identify ideas

Our award-winning VTAR framework focuses on analysing large volumes of financial data in the four components of Value, Trend, Activity and Risk (VTAR). This framework provides a holistic view of financial markets and identifies investment opportunities across asset classes, sectors, geographical regions, and time periods. The UOB Personal Financial Services Investment Committee examines these insights, in tandem with key risks, and comes to a consensus to determine the attractiveness of each potential investment idea.

Trend


Purpose

Understanding the trend of the investment.

Common indicators
  • Simple Moving Averages (MAs)
  • Relative Strength Indicator (RSI)
  • Fund flows

Using VTAR to identify ideas

Our award-winning VTAR framework focuses on analysing large volumes of financial data in the four components of Value, Trend, Activity and Risk (VTAR). This framework provides a holistic view of financial markets and identifies investment opportunities across asset classes, sectors, geographical regions, and time periods. The UOB Personal Financial Services Investment Committee examines these insights, in tandem with key risks, and comes to a consensus to determine the attractiveness of each potential investment idea.

Activity


Purpose

Understanding the macro environment and business activities that may affect performance.

Common indicators
  • Central bank policies
  • Composite Purchasing Managers Index (PMI)
  • Industrial Production (IP) and Retail Sales

Using VTAR to identify ideas

Our award-winning VTAR framework focuses on analysing large volumes of financial data in the four components of Value, Trend, Activity and Risk (VTAR). This framework provides a holistic view of financial markets and identifies investment opportunities across asset classes, sectors, geographical regions, and time periods. The UOB Personal Financial Services Investment Committee examines these insights, in tandem with key risks, and comes to a consensus to determine the attractiveness of each potential investment idea.

Risk


Purpose

Identifying key markets risks and potential mitigating factors.

Common indicators
  • Geopolitical events
  • Industry- or region-specific events
  • News flows
Equities

Equities

We maintain a generally favourable view on equities as they are poised to gain from the global economic recovery.

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Fixed Income

Fixed Income

We are neutral on fixed income and see a need to be selective as longer-term interest rates are likely to trend higher.

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Currencies and Commodities

Currencies and Commodities

Despite strong US economic growth, the US dollar is likely to weaken against most Asian currencies.

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Risk-first Approach

Risk-First Approach

The uneven pace of economic recovery across various regions can result in market volatility even as economies reopen. Our proprietary Risk-First approach can help smoothen the ride for investors.

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Core Investing

Core Investing

An allocation to Core solutions helps to lower downside volatility – a much-needed outcome during this challenging period. Find out more about our Core Investing strategies.

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Tactical Investing

Tactical Investing

Tactical strategies are identified using our award-winning VTAR framework, which focuses on analysing financial data in the four components of Value, Trend, Activity and Risk (VTAR). Find out more about our Tactical Investing strategies.

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US and China

US-China Technology Battle: Playing Both Sides to Win

The technological rivalry between the US and China will continue to intensify as both countries continue to strengthen their capabilities. Investors should gain exposure to both markets to capture growth opportunities.

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Sustainability

Sustainable Investing: Green is the New Gold

In Sustainable Investing, investors should focus on the value chain surrounding “green” activities. Digitalisation generates demand for energy-efficient solutions while decarbonisation creates opportunities in the electric vehicle production supply chain.

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AI and Healthcare

Healthcare’s Technology Revolution: Riding the Crest of Innovation

Healthcare is in the midst of a technology-driven revolution. Powered by Artificial Intelligence (AI) and robotics, innovations across the entire Healthcare spectrum present investors with new investment opportunities and higher earnings potential.

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High Conviction Calls

Setting the Stage for Recovery: Early-risers or Late-bloomers?

For the next six months, investors should allocate more towards value-cyclical late-bloomers such as US Financial and European Equities. But do not discount the early-risers: Maintain exposure to Asia ex-Japan equities to tap on structural drivers, despite tighter liquidity, and look out for a possible rotation back to US quality growth equities as economic growth moderates towards end-2021.

Late-bloomers
Early-risers

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Country Focus

Overview

Equities
Valuations remain attractive for some regional equity markets, with opportunities to enter selected sectors that will benefit from an economic recovery.

Fixed Income
The rise in bond yields in Asia is likely to slow amidst low inflation expectations and narrowing spreads.

Currency
Many Asian currencies are likely to follow the CNY and strengthen against the USD as the global economy recovers.

Click on the country icons to view respective country’s updates

Country Focus

uobar_countryfocusmap

Equities
Valuations remain attractive for some regional equity markets, with opportunities to enter selected sectors that will benefit from an economic recovery.

Fixed Income
The rise in bond yields in Asia is likely to slow amidst low inflation expectations and narrowing spreads.

Currency
Many Asian currencies are likely to follow the CNY and strengthen against the USD as the global economy recovers.

Click on the country icons to view respective country’s updates
SG Flag

Singapore

5.5GDP (y/y%)

1.0CPI (y/y%)

Equities
Compared with regional peers, Singapore equities are relatively cheap and are expected to recover in line with the global economy. Given attractive dividend yields against low interest rates, yield hunting should drive up equities, especially in Banks and Real Estate.

Fixed Income
Inflation is expected to remain benign at +1.0% for 2021. This should anchor longer-dated bond yields in the event of a US yield spike.

Currency
The Singapore Dollar (SGD) should strengthen to 1.33 against the US dollar (USD) by year-end. This is supported by the brighter global growth outlook, especially in Asia.

MY Flag

Malaysia

4.0GDP (y/y%)

3.0CPI (y/y%)

Equities
Despite attractive valuations, investors need to be selective as the recovery is uneven across sectors. The gradual resumption of activities should support the construction sector while a global economic recovery would benefit the Oil & Gas and Financial Sectors.

Fixed Income
The overnight policy rate (OPR) should remain unchanged given targeted domestic measures to support an uneven recovery. Support by domestic institutional investors should cushion volatility amid rising US bond yields.

Currency
The Malaysian Ringgit (MYR) is expected to maintain around 4.15 against the USD by Q4 2021 on Asia’s recovery and higher oil prices, but with political instability limiting gains.

TH Flag

Thailand

1.5GDP (y/y%)

1.5CPI (y/y%)

Equities
Accommodative monetary and fiscal policies should support the Stock Exchange of Thailand (SET) index. But slow vaccine rollouts and the uncertain reopening of the economy is likely to cap any upside at 1,650. The subsequent recovery should benefit the Retail, Banking and Tourism Sectors.

Fixed Income
The Bank of Thailand is expected to keep rates unchanged at 0.5%. Low inflation and rising nominal yields could attract fund flows into bonds and limit further yield increases.

Currency
COVID-19 fears, economic uncertainty and a declining current account surplus have weighed on the Thai Baht (THB). The THB could weaken to 32.5 against the USD by Q4 2021.

ID Flag

Indonesia

3.8GDP (y/y%)

2.0CPI (y/y%)

Equities
The equity market is likely to move sideways due to a delay in vaccine supplies. Direct stimulus measures to boost consumption are expected to kick in, benefiting Banks, Consumer Staples, Property and Miners.

Fixed Income
The reduction in tax on bond interest income from 15% to 10% should narrow the Indonesia-US 10-year yield spread by 30 to 50 basis points, limiting pressure on the Indonesian 10-year yield.

Currency
An expected increase in imports could see demand for USD rise in coming months. We expect limited upside for the Indonesian Rupiah (IDR) at 14,800 against the USD until Q4 2021.

CN Flag

China

9.1GDP (y/y%)

1.9CPI (y/y%)

Equities
Valuations remain attractive. The style rotation between value and growth stocks will persist as the government rolls out deleveraging measures. Despite short-term volatility, long-term structural growth opportunities are intact. We favour reflationary beneficiaries including Materials, Capital Goods and Financials.

Fixed Income
An improving economy and inflation expectations continue to push bond yields higher. However, this rise in yield is likely to be contained in H2 2021 by reducing liquidity and credit supply.

Currency
The Chinese Yuan (CNY) could see a modest appreciation against the USD amid the continued economic recovery and weak USD outlook. It will maintain at 6.43 against the USD in H2 2021.