Investment Roundup

23 April 2024

“Tension escalates in the Middle East; continued monitoring of geopolitical developments will be essential to adapt investment approaches”


In the midst of the Israel-Iran conflict, our attention remains focused on geopolitical hedging strategies to navigate potential market impacts.

Source: Bloomberg Finance L.P.

Initial reports suggest minimal physical ramifications from Iran’s strikes on Israel. The US is advocating for restraint to prevent further escalation, supporting a scenario of confined conflict. Bloomberg Intelligence underscores this by indicating limited immediate effects on oil prices.

This is further supported by Iran’s declining oil exports since 2012 due to sanctions, with China emerging as the largest buyer. In other words, the expectation that localised conflicts, such as those in Gaza, are unlikely to significantly disrupt oil markets.

Oil prices have remained relatively stable below $100 per barrel. However, caution is advised due to uncertainty surrounding potential Israeli reactions and their impact on regional oil supply dynamics.

The GSCI Commodity Index to S&P 500 ratio has hovered near a 50-year all-time low, prompting consideration for diversification into commodities. Commodities may offer a hedge against inflation, with returns relatively independent of traditional asset classes.

Gold prices have also surged 15.6% YTD, driven by multiple factors including inflation concerns and strength in the US dollar. This points to heightened demand, potentially from central banks seeking to diversify reserves amid geopolitical uncertainties.

In light of geopolitical tensions, East Asian central banks may increasingly turn to gold as a hedge against concentration risk in US dollar reserves. Gold serves as an alternative currency and a safeguard against ongoing uncertainties in the Middle East.

In conclusion, while the Israel-Iran conflict presents geopolitical risks, cautious investment strategies, including diversification into commodities and gold, can mitigate potential market disruptions. Continued monitoring of geopolitical developments will be essential to adapt investment approaches accordingly.

Fixed Income Strategy

Over the past two weeks, US Treasury yields reached fresh year-to-date highs on Fed Chair Powell’s comments that economic data shows “lack of progress on inflation” and policymakers “can maintain the current level of restriction”, before fading slightly on concerns about escalating Middle East tensions. Nevertheless, market-based Fed policy expectations have been little changed, and forwards continue to price the first 25bp cut in 3Q, and just 45bp of total easing this year, perhaps as market participants view Powell’s hawkish comments catching up to the reality of the data flow following 3 consecutive upside surprises to CPI, and upside risks to growth in the coming months. Overall, data flow is likely to inform the path of Fed policy expectations, with the next employment data still 2 weeks away. Short-dated bonds may stabilize over the near term, but long-term yields could continue to drift higher with the market-implied first cut not imminent. We continue to be in favour of shorter durations.

US Yields Climbed on Hawkish Policy Expectations

Source: Bloomberg Finance L.P.

Geopolitical risk centred around developments in the Middle East, and the trajectory of oil prices could have implications for credit spreads. At this juncture, the outlook for oil seems to hinge on whether there is further escalation between Iran and Israel, with the geopolitical risk premium at least partially priced in already. Nevertheless, with tensions simmering on both sides, markets may continue placing a sizeable premium on the oil price in the immediate term. In the event the conflict expands and disrupts oil supplies, oil price could increase over $100. Beyond the short-term spike, should oil settle around $85 through May and $80-85 in 2H24, this provides a positive fundamental backdrop for the oil and gas sector. Among oil and gas credits outside the Middle East region, Asia and Latin America issuers offer 30-50 bp and 120-140 bp respective spread pick-up over US comparables.

In China, the government is reportedly exploring establishing a national platform that acquires qualified property projects to ensure completion. Once construction is completed, the newly built units would be sold or rented out as part of social housing initiatives. Such a platform if implemented will address unfinished projects but not all other issues. Timing and scale of the overall program could help drive the medium-term outlook for the sector. Monetization of developers’ assets including projects under development is credit-positive and improves residual value attributable to offshore creditors. It could also help some of the surviving developers avoid near-term defaults. However, this may be insufficient to fully stabilize the sector. Meanwhile, sector fundamentals remain under pressure. March new home prices fell 2.7% year-on-year and sales performance of SOEs and POEs continued to diverge. We look to maintain positioning in central SOE property developers.


For US market, we maintain a cautious stance while simultaneously recognizing that the recent pullback is likely to be temporary, rather than evolving into a severe or prolonged bear market. This perspective is underpinned by two key factors.

Firstly, historical evidence suggests that bear markets typically transpire when the economy is in or on the cusp of a recession. At present, there are no indications of an imminent recession. Robust GDP data highlights the resilience of the US economy. Moreover, the Bloomberg Financial Condition Index, which gauges market stress by considering factors such as stock prices, market volatility, and credit spreads, supports this view. The index currently resides in the high positive territory, indicative of accommodative financial conditions and it is even more favourable than when the Fed commenced its rate hikes two years ago.

Bear markets typically coincide with periods of Fed rate hikes. However, we currently do not observe the conditions necessary for the Fed to implement such rate hikes, even in the face of unexpectedly higher inflation data. Our base scenario supports the belief that the Fed may ultimately opt to reduce rates, albeit potentially later than initially anticipated. This view is substantiated by an examination of the Consumer Price Index (CPI) components. A closer analysis indicates that the previous downward trajectory of inflation was primarily driven by declining prices of goods. Given prices of good cannot go further down, a decline in both shelter and services are needed for a decrease in the CPI. Notably, wage growth, a significant driver of service prices, is exhibiting a trend of moderation. This trend is further supported by a decrease in the US job quits rate over recent months. All in all, Fed is more likely to drop or hold rates, rather than hiking rates, a condition that is associated with prolonged bear markets.

In considering the ongoing conflict in Israel and the Middle East, data suggests the duration of a selloff resulting from geopolitical events during 1973 to 2023 indicate that while stocks may exhibit volatility in the short term, the impact of geopolitical events on the market has historically been brief and of moderate magnitude. This lend further support to our belief that the current pullback is transitory.

Overall, the decline in the S&P 500 has been relatively contained, with a decrease of approximately 5.5% from year-to-date highs. Notably, the sectors most affected by the pullback were those sensitive to interest rates, such as real estate, technology, and growth stocks. Conversely, defensive sectors, particularly utilities, have demonstrated resilience during this period. Sectors with higher earnings growth forecasts that have experienced a greater pullback offer a greater appealing risk/return opportunity. This points to sectors such as technology, communication services, and consumer discretionary. For investors with a longer-term perspective, this pullback may present an opportunity to buy the dips.

This document contains material based on publicly-available information. Although reasonable care has been taken to ensure the accuracy and objectivity of the information contained in this document, Raffles Family Office Pte. Ltd. (“RFOPL”) and Raffles Assets Management (HK) Co. Limited (“RAM”) make no representation or warranty as to, neither has it independently verified, the accuracy or completeness of such information (including any valuations mentioned).  RFOPL and RAM do not represent nor warrant that this document is sufficient, complete or appropriate for any particular purpose. Any opinions or predictions reflect the writer’s views as at the date of this document and may be subject to change without notice.
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Portfolio Managers:

William Chow – Deputy Group CEO

William Chow – Deputy Group CEO

Mr. William Chow brings over two decades of asset management experience and currently oversees Raffles Family Office’s (RFO’s) Advanced Wealth Solutions division while also serving on its Board of Management and Investment Committee.

He joined RFO from China Life Franklin Asset Management (CLFAM), where as Deputy CEO from 2018 to 2021 he oversaw $35 billion in client investments. William also chaired the firm’s Risk Management Committee and was a key member of its Board of Management, Investment Committee and Alternative Investment Committee. Prior to CLFAM, he spent 7 years at Value Partners Group, the first hedge fund to be listed on the Hong Kong Stock Exchange, where he was a Group Managing Director. He started his career at UBS as an equities trader and went on to take up portfolio management roles at BlackRock and State Street Global Advisors from 2000 to 2010.

William holds a Master’s degree in Science in Operational Research from the London School of Economics and Political Science, and a Bachelor’s degree in Engineering (Hons) in Civil Engineering from University College London in the UK.

Derek Loh, Head of Equities

Derek Loh – Head of Equities

Mr. Derek Loh is the Head of Equities at Raffles Family Office. Derek has numerous years of work experience from top asset management firms and Banks – 16 Years on the Buy-side across 3 Major Cities in Hong Kong, Singapore and Tokyo. Derek demonstrates in-depth industrial knowledge and analysis, covering mostly listed equities.

As an Ex-Portfolio Manager for ACA Capital Group, Derek managed a multi-billion-dollar global fund for a world-renowned sovereign wealth fund and reputable institutional investors. Previous notable investors serviced include Norges Bank (Norwegian Central Bank), Bill & Melinda Gates Foundation and Mubadala. Derek holds an Executive MBA from Kellogg School of Management and HKUST. He is also a CPA.

Ek Pon Tay – Head of Fixed Income

Ek Pon Tay – Head of Fixed Income

Mr. Tay Ek Pon is responsible for fixed income investment management at Raffles Family Office. He has over 20 years of fixed income experience across Singapore and Japan.

Prior to joining Raffles Family Office, Ek Pon was a portfolio manager at BNP Paribas Asset Management since 2018, responsible for Asia fixed income mandates. From 2016 to 2018, Ek Pon led the team investing in Asian credit at Income Insurance. From 2011 to 2016, he worked at BlackRock, managing benchmarked and absolute return fixed income funds. Earlier in his career, he held several positions as a credit trader in banks for 9 years.

Ek Pon graduated from the University of Melbourne with a Bachelor of Commerce and Bachelor of Arts.

Sky Kwah – Director, Investment Advisory

Sky Kwah – Director, Investment Advisory

Mr. Sky Kwah has over a decade of work experience in the investment industry with his last stint at DBS Private Bank. He has achieved and receive multiple awards over the years being among the top investment advisors within the bank. He often deploys a top-down investment approach, well versed in multiple markets and offering bespoke advice in multiple assets and derivatives.

Prior to his role at Raffles Family Office, Sky worked at Phillip Capital as an Equities Team leader handling two teams offering advisory, spearheading portfolio reviews and developing trading/investment ideas.

He has been interviewed on Channel News Asia, 938Live radio, The Straits Times and LianheZaobao as a market commentator and was a regular speaker at investment forums and tertiary institutions.

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