A resilient China market in the face of tariff threats

Manager Comments

^{Source: Morningstar, as of 31 December 2024. China: MSCI China Index, Taiwan: MSCI Taiwan Index, India: MSCI India Index, Korea: MSCI Korea Index, Singapore: MSCI Singapore Index, Malaysia: MSCI Malaysia Index, Indonesia: MSCI Indonesia Index, Thailand: MSCI Thailand Index}

Asian tech companies continued to outperform

December was a quiet month given the holiday season. However, the US equity markets continued to push ahead with most of the gains narrowly focused on the largest tech stocks including Broadcom, Tesla, Google and Apple.

This strong performance spilled over into the Asian markets, especially in relation to the Taiwanese large cap tech sector, making Taiwan the best performing market in Asia last month.

China overcame tariff fears

China was also amongst the best performing markets in December, benefitting from news of better-than-expected exports and continued stabilisation in the real estate sector.

Also, and somewhat ironically, Trump’s tariff threats are being viewed positively. Investors are hopeful that in response to such threats, China will announce a meaningful stimulus program in early 2025. Over the longer term, tariffs can act as a catalyst for accelerating the localisation of China’s tech supply chain, which would benefit Chinese tech companies.

Korea is still struggling

Korea, on the other hand, has had a bad month. Following a botched attempt at imposing martial law last month, the Korean President is now facing an impeachment charge - the latest in a series of blows to the South Korean economy over the past few months.

Prior to this, the country had been experiencing weak export growth, anemic domestic consumption, and labour unrest. The current political turmoil has further weakened investor confidence in the country.

India corrected, but we remain positive

The market saw meaningful fund outflows in December. This followed a bigger-than-expected slowdown in the fourth quarter of 2024, causing the Reserve Bank of India (RBI) to revise down its GDP forecast for 2024 and 2025. Investors were also concerned about the market’s high valuations, and took some profit in order to reallocate to other markets.

However, we continue to view India positively, given that in our view, the market still offers the best structural growth play in Asia region. Furthermore, we expect policies in the US to be inflationary and underpin a strong US dollar. This leads us to favour India, which is more domestically oriented and less sensitive to US macro conditions.

Regional Asia Solutions

Previous month performance

^{Source: Morningstar. Performance as at 31 December 2024, SGD basis, with dividends and distributions reinvested, if any. Fund refers to United Asia Fund – A SGD Acc. Benchmark: April 1992 – December 2011: MSCI AC FE ex-Japan; January 2012 to present: MSCI AC Asia ex-Japan. Performance figures for 1 month till 1 year show the per cent change, while performance figures above 1 year show the average annual compounded returns.}

^{Source: Morningstar. Performance as at 31 December 2024, SGD basis, with dividends and distributions reinvested, if any. Fund refers to United Greater China Fund – A SGD Acc. Benchmark: MSCI Golden Dragon Index. Performance figures for 1 month till 1 year show the per cent change, while performance figures above 1 year show the average annual compounded returns.}

• We saw further stabilisation in our United Asia Fund performance last month, The Fund outperformed its benchmark by 0.17 percent.
• China was the largest contributor to performance this month due to our overweight in Financials and Industrials (such as ports and construction services companies).
• We also benefitted from our underweight position in Korea but our holdings in Samsung Electronics was a drag on performance this month.
• Performance detraction was due to our underweight in the China and Taiwan tech sector, and overweight position in India.
• The United Greater China Fund underperformed its benchmark by 0.29 percent. Similar to the United Asia Fund, this detraction was due to our underweight in the China and Taiwan tech sector

Current month rebalancing

• Our AI model’s recommendation this month is to underweight the China and Hong Kong markets. Meanwhile, our analysts are neutral on China but see the potential for short term weakness. As a result, we have decided to take a slight underweight position on China and Hong Kong, but less than that proposed by the AI model.
• We remain underweight in Korea. While the market offers a few tactical opportunities, at the moment, both our analysts and AI model do not recommend upgrading the market.
• Both our AI model and analysts recommend a continuation of our Taiwan underweight position. The current seasonally weak sales is unlikely to reverse course until 2026.
• We remain overweight in Malaysia. This is in line with both our AI model and analyst recommendations. Our analysts’ on-the-ground feedback is that there continues to be significant bottom up opportunities in the market.
• We remain overweight in India. Our AI model is positive on this market, and this position is reflected by our analysts who are detecting good bottom up opportunities and long term structural strength.
• January rebalancing for the United Greater China Fund was largely at the stock level. We increased our exposure to Taiwan tech companies, funded by a relative reduction in China financials

Multi-Asset Solution

^{Source: Morningstar. Performance as at 31 December 2024, SGD basis, with dividends and distributions reinvested, if any. Fund refers to United SG Dynamic Income Fund – A SGD Acc. Benchmark: Singapore Overnight Rate Average (SORA) Index +2%. Performance figures for 1 month till 1 year show the per cent change, while performance figures above 1 year show the average annual compounded returns.}

Previous month performance

• The United SG Dynamic Income Fund underperformed by 0.69 percent December vs benchmark (SORA + 2 percent).
• Performance detraction came from our underweight in Asia Equities, and overweights in SG REITs, SG Bonds and Asia Bonds. The latter three asset classes were weighed down by continued strength in US bond yields.
• The Strategy Committee, however, contributed to the Fund’s performance by instituting a higher exposure to SG Equities than recommended by the AI-Model. SG Equities was the second best performer in December.

Current month rebalancing

As of December 2024

• The AI model turned more positive on equities for the month of January and is calling to overweight Asia Equites and SG Equities.
• This is consistent with our more positive view on equities in general. Our Strategy Committee continues to hold a positive view on SREITs but recommended a reduction in the SREITS allocation to allow for a greater allocation to SG Equities.
• The Strategy Committee therefore recommends cutting our allocation to SREITs (-20%) and Money Markets (-20%), The proceed are moved to support a bigger exposure to SG Equities (+20%) and Asia Equities (+20%).

For more details on the funds above, check out the respective Monthly Fund Commentaries