Q1 2023 Portfolio performance

• As of 31 March 2023, UOBAM Megatrends portfolio returned 7.2% for the first quarter.

Portfolio returns (% in SGD terms) and ETF weight (%) 31 December 2022– 31 March 2023

Source: Factset/Bloomberg/UOBAM. Portfolio returns as at 31 March 2023. ETF average weights from 31 December 2022 to 31 March 2023, cash remains at 2.0%.

The information about asset allocation provided herein are subject to change at the discretion of UOBAM without prior notice. Past performance of the portfolio or UOBAM and any past performance, prediction, projection or forecast on the economy or markets are not necessarily indicative of the future or likely performance of the portfolio or UOBAM. Returns are calculated on a single pricing basis.

Breakdown by theme

1) Changing Demographics

Performance

Source: Factset/Bloomberg/UOBAM. Returns from 31 December 2022 to 31 March 2023.

Past performance of the portfolio or UOBAM and any past performance, prediction, projection or forecast on the economy or markets are not necessarily indicative of the future or likely performance of the portfolio or UOBAM. Portfolio returns on the scheme is calculated on a single pricing basis.

Source: Factset/ UOBAM. Returns from 31 December 2022 to 31 March 2023.

Past performance of the portfolio or UOBAM and any past performance, prediction, projection or forecast on the economy or markets are not necessarily indicative of the future or likely performance of the portfolio or UOBAM. Portfolio returns on the scheme is calculated on a single pricing basis.

Meta Platforms Inc.’s share price rose as it recorded increase in daily active users¹, as well as strong top and bottom lines that beat consensus estimates. It also provided strong forward guidance that helped improve investor sentiments after share price troughed in November 2022.

Market Development

After holding up well in 2022, the healthcare sector fell in the first quarter of 2023 as investors switched out from defensive sectors into growthier sectors such as technology. Investors anticipated the Federal Reserve to pause or even cut rates by the end of the year, which pushed treasury yields down and benefited growth stocks. Among the ETFs held in the Megatrends portfolio, the iShares Global Healthcare ETF was the only one that returned a negative performance in the first quarter.

The negative impact of higher inflation has started to decrease, and this allowed the consumer discretionary sector to be one of the best performing in the first quarter, benefiting the Global X Millennial Consumer ETF. However, the Columbia Emerging Markets Consumer ETF did not perform as well. It had a strong January on the back of China’s reopening but gave back some of its gains due to the geopolitical tension between China and US caused by the balloon downing incident.

Outlook

The outlook of the healthcare sector remains positive due to reasons such as attractive valuations, strong fundamentals, and robust innovation. An aging population and increasing use of new technology have also benefited the sector. Healthcare profit pools are expected to continue to increase as overall patient volume rises. Furthermore, as the world prepares for an upcoming recession, the healthcare sector is likely to benefit as company earnings in the sector have historically proven to be resilient. Conversely, for the consumer discretionary sector, rising unemployment and eroding consumer savings would likely put pressure on consumer spending growth in the developed markets should there be a recession. However, Asian markets should perform better as China’s reopening and accommodative policies should benefit the region.

2) Environmental

Source: Factset/Bloomberg/UOBAM. Returns from 31 December 2022 to 31 March 2023.

Past performance of the portfolio or UOBAM and any past performance, prediction, projection or forecast on the economy or markets are not necessarily indicative of the future or likely performance of the portfolio or UOBAM. Portfolio returns on the scheme is calculated on a single pricing basis.

Source: Factset/ UOBAM. Returns from 31 December 2022 to 31 March 2023.

Past performance of the portfolio or UOBAM and any past performance, prediction, projection or forecast on the economy or markets are not necessarily indicative of the future or likely performance of the portfolio or UOBAM. Portfolio returns on the scheme is calculated on a single pricing basis.

Tesla Inc.’s share price rose after bottoming in January 2023 as it reported better than expected 2022 Q4 sales and earnings performance. The company also issued encouraging guidance for 2023 that helped improve investor sentiments.

Market Development

The Environmental theme’s performance was positive. The water and utilities sectors have performed well due to supportive government policies and growing demands for green energy as countries strive to meet their decarbonisation goals. However, the Invesco MSCI Sustainable Future ETF did not perform as well due to the underperformance of a few of its top holdings such as Enphase Energy. The stock fell about 20% in the first quarter after surging in 2022 as valuations became too expensive. Nonetheless, we continue to see the environmental theme having strong growth as the world moves towards net-zero.

Outlook

The demand for renewable energy has continued to grow, yet global investment in clean energy is still far below where it needs to be. Enterprises and government agencies have been trying to close the gap and are directing funding towards achieving new energy sources and lower carbon footprints given climate impact concerns and the limited supply of traditional energy sources. The share of renewables in global power generation has continued to rise, and in the last two years, renewables have grown more than the combined increase in coal and natural gas supplies, according to BP². From vehicle electrification to clean energy transformation, the structural demand for renewables would accelerate. With such structural tailwind from the global energy transition, we remain positive on the outlook of investing in renewable and efficient technologies.

3) Digital

Performance

Source: Factset/Bloomberg/UOBAM. Returns from 31 December 2022 to 31 March 2023.

Past performance of the portfolio or UOBAM and any past performance, prediction, projection or forecast on the economy or markets are not necessarily indicative of the future or likely performance of the portfolio or UOBAM. Portfolio returns on the scheme is calculated on a single pricing basis.

Source: Factset/ UOBAM. Returns from 31 December 2022 to 31 March 2023.

Past performance of the portfolio or UOBAM and any past performance, prediction, projection or forecast on the economy or markets are not necessarily indicative of the future or likely performance of the portfolio or UOBAM. Portfolio returns on the scheme is calculated on a single pricing basis.

Palo Alto Networks Inc.’s share price rose as earnings beat consensus estimates and the company lifted its earnings forecast for the year ahead³. The company raised cash flow margin and operating profitability targets, and has now posted three consecutive quarters of profitability following a decade of being in the red.

Market Development

The Digital theme was the best performing theme in the first quarter. After being beaten down in 2022 due to rising interest rates, it had a good recovery in the first quarter as inflation moderates. As a result of the banking turmoil in March, investors are even anticipating the Federal Reserve to cut rates by the end of the year. Lower Federal fund rate would be positive for stocks in the growth segment of the market. The best performing ETF in the portfolio is the Global X Artificial Intelligence and Technology ETF as artificial intelligence related stocks soared after ChatGPT went viral.

Outlook

The impact of the digital trend is profound and game changing. New digital business opportunities are expanding at a rapid pace and the last two years have marked a shift in the evolution of the world’s digital readiness. We continue to see strong structural growth in the digital space due to advancements in artificial intelligence, and the shift in consumption from physical retail outlets to online, thus driving a strong demand for digital infrastructure to support the growth. One example of late would be the proliferation of artificial intelligence engines such as ChatGPT and Stable Diffusion that are able to perform a myriad of tasks such as digital marketing and create complex contents. As such, we remain positive on the outlook of investing in the digital space.

¹Meta, “Meta Reports Fourth Quarter and Full Year 2022 Results”, 1 February 2023

²BP Statistical Review of World Energy, June 2022

³CNBC, “Palo Alto Networks lifts earnings guidance as it pursues profitable growth”, 21 February 2023