GLOBAL EQUITY
Three-year sector performance
SECTOR ANALYSIS
The sector posted an average return of
14.69% in US dollar terms for the threeyear period, outperforming emerging
market equities. Top performers typically
maintained a higher exposure to US equities
and were relatively underweight financials.
The weaker performers were mainly
funds with a structural bias toward certain
thematic areas such as energy and materials.
Overall, we did not see any particular style
bias helping deliver outperformance, which
was evenly spread across strategies focusing
on growth, value, larger cap, smaller cap, low
volatilities, dividend and income.
MARKET REVIEW
Source: FE Analytics (31 Mar ’13 to 31 Mar ’16)
Three-year annualised return/volatility
Developed market equities started off
with a strong run mainly because of
improving macroeconomic data, business
confidence and corporate earnings. While
the US economy continued to show signs of
recovery, the US Fed began to taper its QE
measures and subsequently hiked interest
rates at the end of 2015. On the other
hand, central banks in the Eurozone and
Japan kept an accommodative monetary
stance aiming to combat deflation and
support growth. Emerging market equities
generally underperformed due to multiple
factors including continued worries over
China’s economic growth, the sharp fall
in commodity prices and capital outflows
triggered by the tightening measures of
the US Fed. US equities proved the top
performer over the period.
MARKET OUTLOOK
Global equity valuations are now in line
with their historical average, with emerging
market equities generally cheaper than that
of developed markets. With lower valuations,
EM equities have shown a strong rebound
recently. QE measures by the major central
banks since the financial crisis have boosted
global asset prices. As the US Fed normalises
monetary policy and the Eurozone and
Japan approach a negative interest rates
environment, it is becoming increasingly
difficult to generate returns as high as
that previously achieved. Performance of
equities continues to diverge. An active
management stance combined with a
diversified portfolio is likely to be key to
achieving outperformance.
Provided by FE Advisory Asia as of 31 May ’16
Source: FE Analytics (31 Mar ’13 to 31 Mar ’16)