As an investor stepping into 2023, there are a lot of reasons to be cautious this year.
The market outlook may look grim to investors this new year, from ongoing geo-political conflicts to global markets facing economic instability (since the 2008 financial crisis).
However, it’s not all doom and gloom, as we are starting to see turning points that can help investors re-strategize their investments in 2023. Remember: Think long-term.
Here are some things to look out for in 2023 to ensure you’re investing the right way.
A better economic outlook in Asia
After the economic headwinds of the global markets in 2022, emerging markets in Asia will set the stage by joining hands with China, and ASEAN is playing a big role in establishing long-term positive growth.
The great reopening of China
China’s strict “zero-covid” policy has strained the global economy due to the constant lockdowns and supply chain issues. However, now that the country is slowly opening up its borders and loosening restrictions, there is hope for economic recovery within the Asia region.
As China relaxes its Covid-related restrictions and reopens its borders, oil prices will potentially rise due to increasing demand for fuel. The re-opening of China’s borders will also contribute to its economic rebound – paving the way for reputable businesses, whether local or foreign, to bring their investments into the country.
The reopening of China will contribute to the dynamics of the global economy while adding to the attractiveness of Asia due to its geographic proximity. For investors who may not want to focus solely on China’s potential, the ASEAN region can be a choice pick for both equities and fixed-income markets.
ASEAN continues to grow in 2023
While China’s steady progression towards growth could have a positive effect on Asia and the rest of the world, the ASEAN region continues its path to becoming one of the fastest-growing regions for investors in 2023.
One of the reasons why is through Foreign Direct Investments (FDI) where countries such as Malaysia, Singapore, Thailand, Indonesia, and Vietnam are becoming attractive destinations for companies to invest into.
And FDI will play a huge role in driving economic growth within the region whereby IMF projects that the economy will grow by 6% in 2023, outpacing the projected global GDP growth rates. And ASEAN is poised to benefit tremendously from the US-China tensions as companies might seek to move their supply chain out of China.
Other factors such as the US moderating inflation and the US Fed potentially downshifting the magnitude of hikes, shows signs of an improving economy which can have positive effects on ASEAN’s continued growth.
Patience and strategy are key in 2023 for the investor
Principal Malaysia believes that there are silver linings that lie ahead for long-term investors despite the volatile outlook.
The key focus based on their analysis is to be more defensive and to stay invested for the long run with the right investment strategy.
Depending on how risk-averse you are and how much growth you hope to achieve, you can approach investing in three ways:
- Low-risk exposure/risk-averse: For investors who seek defensive investment strategies, safer options include fixed-income funds such as bonds or money market funds, particularly during challenging economic conditions. You can consider Principal’s Principal Lifetime Bond or Principal Islamic Money Market Fund to outride the market volatility.
- Moderate risk exposure/moderately aggressive: If you’re looking for a combination of growth and income, or can handle a more moderate risk exposure, you can explore Principal Asia Pacific Dynamic Mix Asset Fund which provides exposure to Asia and income across the region as it is a fund with a combination of equities and fixed income exposure within Asia pacific.
- High-risk exposure/aggressive: 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 that want diversified exposure, Asia and ASEAN can also be a choice of pick e.g. Principal Asia Pacific Dynamic Income Fund and ASEAN Dynamic Fund, the flagship fund for Asia and ASEAN.
You can get more fund details below with a risk scale ranging from conservative to aggressive:
Source: Lipper as of 31 Dec 2022
It is important to remember that time in the market is more important than timing the market. Keep on investing and think for the long-term.
If you’re undecided/still figuring out your goals and risk tolerance, you may consider starting with fixed-income funds to preserve your capital and generate some income.
Double your prosperity with Principal
Taking a more strategic approach and staying invested for the long run is its own rewards and earn double your rewards this lunar year!
From 16th January until 14th February 2023, Principal is offering a 0% sales charge. You can earn Double Prosperity rewards when you invest online with Principal using cash or EPF savings when you use the offer code “0.88percent”.
What are the rewards?
- Up to 0.80% reward of your total net investment (one-off and combination of EPF and Cash investment)
- Touch ‘n Go NFC card with investments of RM5,000 or more
What to learn more about their offers? Head over to their page here.
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