Domestic markets pulled back in February due to a weakening peso, mixed corporate earnings results and investor concerns of rising inflation. As a team we have been highlighting the improvement in cyclical and earnings momentum globally during 2016 amid a backdrop of continued monetary accommodation which has supported equities and credit outperformance. As such, we have been close to maximum overweight equities for most of 2H 2016 as the cyclical recovery theme reasserts itself over negative geopolitical uncertainty. The signs of economic recovery and rising inflationary pressures show no signs of abating at the moment as the recovery broadens out across regions and sectors. While we note that short term equity sentiment is now a tad over optimistic, the growth momentum and reasonable equity valuations keep us bullish on equities. Looking forward, we remain vigilant to some key risks: 1) disorderly unwind of high private sector leverage in China and Emerging Markets, 2) a more hawkish than expected shift of US monetary policy, 3) rising European political risk premia, and 4) rising US-China tensions. Given that domestic equity valuations are less demanding compared to the past few years, coupled with positive growth momentum domestically and globally, the fund manager favours domestic equities over domestic bonds.

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Source: PLUK Fund Fact Sheet Feb. 2017