A rebound in oversold stocks

Manager Comments

Some gains reversed in January

The AI-augmented Asia equity funds largely underperformed in the month of January after outperforming in the prior two months. Most of the detraction came from our underweight position in Korea and China and overweight position in India.

Our underweight in Korea worked well in November and December 2024, but worked against us in January 2025. Key benchmark stocks like Samsung Electronics and SK Hynix rebounded from their oversold levels. The strong performance of AI stocks in the US also helped to boost investor sentiment for Asian tech stocks such as index heavyweight TSMC.

We believe Korea’s rebound is temporary

We retain our negative view of Korea and believe that the country’s current economic struggles go far beyond the political crisis sparked by President Yoon’s attempt at imposing martial law. Many of the problems are structural in nature.

This includes the ability of Korea’s key industries, ranging from shipbuilding and construction to autos and semiconductor manufacturing, to withstand competition for newer players in China and elsewhere. In addition, export-dependent Korean companies have been hurt by the government’s decisions to join the US in its China sanctions.

Tariff uncertainties continue to hold back China

The short-term outlook for China remains uncertain and the market is likely to stay volatile ahead of policy announcements from the US. Markets are braced for US announcements of more negative measures. Nevertheless, DeepSeek’s launch helped to inject some optimism into Chinese tech stocks just ahead of the Lunar New Year holidays.

The development of a Chinese AI large language model which claims to outperform OpenAI’s ChatGPT in key areas, while spending only a fraction of the cost to train and develop, has unnerved global markets. If substantiated or more contenders emerge, this could severely impact future capital expenditure on AI hardware, which in turn would undermine the entire Taiwan AI hardware supply chain.

Regional Asia Solutions

United Asia Fund

Previous month performance

^{Source: Morningstar. Performance as at 31 January 2025, 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.}

• The United Asia Fund underperformed by 2.76 percent in the month of January after outperforming in the prior two months.
• The biggest detraction in performance came from our underweight position in Korea and China, and overweight position in India.
• Our underweight in the tech sector detracted from our performance both in China and Taiwan.

Current month rebalancing

^{Source: Morningstar, January 2025}

• 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, both our analysts and AI model do not recommend upgrading the market for the time being.
• 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 next year.
• We remain overweight in Malaysia, 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.

United Greater China Fund

^{Source: Morningstar. Performance as at 31 January 2025, 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.}

Previous month performance

• The Fund underperformed by 1.83 percent in the month of January, with most of the detraction coming from our underweight position in many of the large cap index eCommerce and tech stocks that did well this month.
• We have a small tactical overweight in China as we believe that China valuations are very attractive at current levels, with most of the negative sentiment having been priced in. Hence any positive news may trigger more buying at the margin.

Current month rebalancing

^{Source: Morningstar, January 2025}

• There were no substantial adjustments to the country/sector allocations this month.

Multi-Asset Solution

^{Source: Morningstar. Performance as at 31 January 2025, 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 Fund underperformed by 0.15 percent in the month of January vs the SORA + 2 benchmark.
• We benefitted from our overweight call in SG Equities and SG Bonds as these were the best performing asset classes in January.
• Performance detraction came from our overweight call in Asia Equities which turned out to be the worst performing asset class last month.

Current month rebalancing

As of January 2025

• The AI model turned more positive on SG Bonds. The Strategy Committee agrees and recommends increasing our allocation from 20 percent to 35 percent.
• This will be partially funded by switching out of money market from 10% to 5%.
• We remain constructive on equities in general hence and will be retaining our allocations to Asia EQ. We are slightly trimming our Singapore equity allocation from 35 to 30 percent.
• Given the recent rising bond yields, we are also trimming our exposure to SG REITs from 10 to 5 percent.

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