5 Investment Trends You Should Look Out For In 2021

The past year has been a strange time for the markets. Who would have predicted a global pandemic that would have such an impact on our lives and our economy, and that would crash markets and then increase almost immediately afterwards?

But with the rollout of vaccinations and the resumption of economies, 2021 should be less volatile. What does this mean for your portfolios? Here are some investment ideas from Principal Asset Management Berhad (Principal) experts on trends to watch.

1. Markets could still be volatile in the short term

Inflation fears tend to drive bond yields higher. Additionally, stocks and bond yields generally have an inverse relationship – when bond yields rise, stocks can fall, and vice versa.

Patrick Chang, chief investment officer at ASEAN Equities at Principal, said there has been a rise in bond yields due to rising inflation expectations. This caused the recent global market correction (i.e. when the stock market falls from a recent high).

While this can lead to short-term market instability, it may only be temporary. “There is no real sign from the data that real inflation is increasing,” Chang said. Bond yields are actually on the rise because the growth outlook is better thanks to the economic recovery and not real inflation.

2. Global economic recovery expected

Jesse Liew, chief investment officer of ASEAN Fixed Income at Principal, notes that the global economic recovery could be below expectations in the first quarter of the year, as lockdowns are still ongoing around the world. However, he added that the recovery is expected to improve in the second quarter with more vaccinations rolled out.

In addition, Chang said the stock markets have seen positive returns since the start of the year, thanks to strong inflows, improving economic data and a decrease in the number of COVID-19 cases in the region. world. We also reached a milestone where global vaccinations exceeded the number of confirmed cases. “This leads us to have more confidence in the fact that developed and emerging countries are moving towards recovery, revitalization and renewal [sic] the environment, ”he said.

Mass vaccinations are still underway and new variants of the virus could pose threats – but on the upside, the resurgence of cases could be contained through better awareness, testing and contact tracing and the availability of vaccines. According to Principal, the global economy is expected to continue to recover over the next twelve months.

3. Positive outlook for Asian markets

“The investment environment for Asian equities remains favorable,” Chang said. With the deployment of vaccines and continued monetary and fiscal support, Principal predicts an economic recovery.

“Within ASEAN, we have a positive contrarian opinion that these markets should be doing well this year,” Chang added. Indeed, most ASEAN markets were undervalued in 2020 and therefore have “deep value opportunities”. There are opportunities for those looking for long-term value in tourism, e-commerce, and commodities, which Principal says will do well this year.

Principal also sees China positively. “US-China relations may be less thorny and volatile in the future,” Chang said. “Washington has just reaffirmed its one-China policy in Taiwan. This is a promising start before the dialogue on other issues such as trade and investment restrictions [take place]. “

4. Malaysian stocks are undervalued

“As we envision the reopening of the post-OCD economy with the deployment of the vaccine, the [Malaysian] the economy will start to recover, ”Chang said. This will lead to a rebound in corporate profits. In addition, Malaysian stocks are cheap, as overseas sales have been inflated.

Nationally, Principal’s target sectors are consumer and retail, technology, telecommunications and commodities. On the other hand, it is underweight the health and plantations sectors.

5. Sukuk and bonds continue to be attractive

The sukuk asset class (an Islamic equivalent of bonds) performed well in 2020. The main Islamic Lifetime Sukuk Fund generated returns of 5.11% last year, while Malaysian equities generated returns of 2 , 4%.

Mohd Fadzil Mohamed, chief investment officer at Principal Islamic Asset Management, said the global sukuk market has remained resilient this year, supported by rising oil prices. “Since November of last year, oil prices have jumped more than 60% following positive developments from the COVID-19 vaccine. This has benefited oil-producing countries in the Middle East, driving up demand for their bonds and sukuk, ”he said.

“The outlook for global sukuk remains positive due to the continued inflow of funds into emerging market assets, which offer higher returns relative to developed markets,” he said. In addition, expectations of slower global growth will support demand for fixed income assets.

Liew, Principal’s ASEAN fixed income director, also said that with higher bond yields, new corporate bonds would likely carry higher yields and generate returns for bond portfolios. . “We continue to advocate a bond allocation in your portfolio because its low volatility is a crucial part of the composition of your portfolio’s asset allocation,” he said.

How to take advantage of these trends?

As an investor, it helps to stay on top of investment trends, but how do you actually benefit from them? You could invest in international stocks, bonds, commodities and other assets. But investing in individual investments alone can take a lot of time and research.

You can also invest in unit trust funds that invest worldwide and in Malaysia. This allows you to instantly diversify your investments, take advantage of current trends and take advantage of the expertise of professional fund managers. For example, Principal has a range of mixed fund investment opportunities available through EPF i-Invest and / or Private Retirement Scheme (PRS):

Names of funds:RiskRegionFund objective
Principal Greater China Equity FundAggressiveChina, Hong Kong and TaiwanStrategically invests in the Greater China region, where you will have the chance to participate in China’s economic growth.
Principal Asia-Pacific Dynamic Income FundAggressiveAsia-Pacific excluding JapanAims to provide regular income by investing in the Asia-Pacific region excluding Japan. At the same time, aims to achieve capital appreciation in the medium and long term.
Principal Dynamic Islamic Asia-Pacific Equity FundAggressiveAsia-Pacific excluding JapanA Sharia-compliant fund that invests in emerging and developed markets.
Principal DALI Equity Growth FundModerateMalaysiaPotentially aims to achieve constant capital growth in the medium to long term.
Main Sukuk Islamic Lifetime FundModerate ConservativeMalaysiaPotentially aims to earn above average income in the medium to long term by investing in a diversified portfolio consisting primarily of sukuk, certificates of deposit, short term money market instruments and other investments according to the principles of the sharia.

Note: The past performance of each fund is not indicative of future performance. Learn more about each fund here. Please read and understand this disclaimer. All funds are subject to your risk tolerance. To learn more about risk tolerance, take this quick test.

Diversify your retirement portfolio with Principal via EPF i-Invest and PRS

Here’s how you can be rewarded when you invest with Principal through the Jom Dapat Lebih Kaw promotion:

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A table that shows the amount of reward you can get by investing with Principal

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A table that shows the amount of reward you can get by investing with Principal

With Principal, there’s never been a better time to take advantage of investing trends and start diversifying your retirement portfolio.

Ready to diversify your investments? Learn more about Principal today.

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