Global Equities Struggle, Bonds Perform Better
In March, global equity markets didn't do well overall, but bond markets performed better. The global equity market declined by 1.3% month-on-month (“MoM”), mainly due to a 2.55% drop in the US market, particularly in the tech sector, which fell by 3.48%. However, Germany's market did well, rising by 1.28%, and key Asian markets like China and Japan didn't fall as much. Malaysia's stock market did poorly, dropping by 4.1%, similar to Taiwan and Thailand, but Singapore's market increased by 1.6%. Meanwhile, the global bond market did better, with a small positive return of 0.15% in March. This was supported by corporate bonds, which had a return of 0.31%.
Overall, global stocks were slightly positive for the year, up by 0.55% year-to-date (“YTD”). Europe and China performed well, while the US market turned negative, mainly due to the technology sector. Malaysia's stock market also did poorly, down 7.4% YTD. The global bond market, including Malaysia's, performed well overall for the year, with- global bonds up 2% and Malaysia bonds up1.5% YTD. The different performances in the markets are due to varying monetary and fiscal policies around the world.
In the US, the Federal Reserve (US Fed) kept interest rates unchanged at 4.25% to 4.5% in March, with expectations of rate cuts later in the year. However, the US Fed has turned dovish, suggesting a tariff-induced rise in inflation is likely temporary. US bond yields fluctuated as the US Fed remained dovish and consumer sentiment was weak, while economic activity remained positive. Therefore, while US tariffs aim to reduce trade deficit with other countries and incentivise investments in the US, the tariffs have instead posed a downside risk to US growth, resulting in a downward revision of US growth by about 0.5% to 1.5%-2%. Coupled with competitive AI platform alternatives in China as well as high valuations, US equity market volatility rose.
In the Eurozone, the European Central Bank cut rates again in March, which helped boost the stock market. Germany's market did well due to economic growth and new spending packages. Meanwhile, China's economic activity was positive in early 2025, with growth in industrial production, retail sales, and investment. The government maintained a pro-growth stance with measures to support the economy.
In Malaysia, despite weak equity market sentiment, economic fundamentals remained stable with low inflation. Economic growth for 2025 is expected to be primary be driven by domestic demand and investment, although exports growth is likely to remain challenging in the near term. In March, BNM announced its projection of 2025 GDP growth of +4.5-5.5% and inflation of between 2.0-3.5% YoY and assessed that the domestic financial markets remained healthy despite current bouts of volatility. BNM kept the policy rates unchanged at 3% in March, balancing growth and inflation risks.
The local bond market is expected to perform well in 2025, with limited downside risk due to reasonable valuations and ample liquidity. Meanwhile, despite the negative performance of the local equity market so far, there is still a positive outlook for local stocks, supported by stable economic growth and attractive valuations. The local market is expected to outperform the global market amidst global economic moderation. The diverging global macro backdrop has led equity flows to broaden to markets outside of the US to countries in the Eurozone, emerging markets and selective Asia markets, thus supporting global equity market performance.
For investment diversification, the PRULink Managed 2 Fund and PRULink Managed Plus Fund are recommended. For Malaysia exposure, the PRULink Equity Plus and PRULink Equity Income funds are suggested. For Asia exposure, the PRULink Asia Great Fund, PRULink Asia Equity Fund, and PRULink Asia Managed Fund are preferred. While for global exposure, the PRULink Global Leaders Fund is preferred.
26/3/2025
Written by Esther Ong
Esther Ong is the Investment Market Strategist of Prudential Assurance Malaysia Berhad (PAMB).Esther is a qualified Chartered Financial Analyst as well as having obtained MSc Investment Management and BSc Insurance & Investment with a Financial Markets Association of Malaysia (Persatuan Pasaran Kewangan Malaysia or PPKM) license.
This feature is to provide general information on the current situation of the economy with the information available at the given time. This feature does not constitute investment advice and cannot be used or substituted as such. The opinions of the author may not necessarily reflect the views of Prudential Assurance Malaysia Berhad.