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Opportunities exist despite uncertainties

Opportunities exist despite uncertainties

  • May 2025
  • By OCBC
  • 10 mins

Uncertainties continue to cloud the economic and investment outlook, but selective opportunities can still be found for investors with the risk appetite and patience.

Structured Investments

Theme: Investment opportunities in Europe

Relatively undemanding valuations and a shift towards more accommodative fiscal and monetary policy are likely to bolster the long-term outlook for Europe. This supportive backdrop is poised to enhance the corporate earnings outlook. In addition, a potential end of the Russian-Ukraine war, could boost the performance of European equities. An end to war could lead to lower energy prices and boost investor confidence, making European equities an appealing proposition.

  • Safran is a major player in global aerospace propulsion and equipment, reporting 2025 revenues of EUR 7.26 billion, a 16.7% increase from the previous year, driven by strong demand in civil aviation and defense. Its joint venture, CFM, holds about 70% of the narrow-body market. The growth of the middle class and point-to-point travel, along with the need to replace aging aircrafts (over 20% of the global fleet is over 20 years old), supports a positive outlook for narrow-body planes. Safran expects over 24,000 narrow-body deliveries from 2023 to 2035, presenting significant opportunities. It is the sole engine supplier for Boeing’s 737 MAX and Comac, and shares engine supply for the Airbus A320neo with Pratt & Whitney, holding 60% of the orders. Safran's aftermarket business, including spare parts and maintenance services, is set to recover due to pent-up demand and delays in new aircraft deliveries, which keep older planes in service longer. Additionally, long-term flight-per-hour contracts provide a steady revenue stream, bolstered by high switching costs.
  • BASF, founded in 1865 and headquartered in Germany, it is one of the world's largest chemical companies, offering a wide range of products that cover the entire chemical spectrum, from commodity chemicals to specialty products. The company is particularly well-known for its strong presence in agricultural crop protection chemicals and emissions control catalysts for vehicles, which are critical for reducing environmental impact. With its extensive portfolio, BASF holds a top three market position in approximately 70% of its business segments, showcasing its significant influence and competitiveness in the global chemical market. BASF is currently undergoing a strategic transformation to streamline operations, which includes divesting its surface technologies and agricultural solutions segments over the next few years. These divisions contribute nearly 35% of total revenue. This shift reflects BASF's focus on optimising its business model and reallocating resources to higher growth areas, aligning with trends in sustainability and innovation in the chemical industry.

Bonds

BP is a global energy company with a wide reach across the world’s energy system. BP has been actively paying dividends and buying back its shares.

BP Capital Markets Plc (GBP)

AIA Group Ltd is a leading insurer in Asia Pacific, with a presence in 18 markets across the region. The group sells a variety of life insurance products and health, pension and investment linked products through tied agents, bancassurance, brokers and direct marketing channels.

AIA Group Ltd (USD)

This bond pays a coupon of 3.375% p.a. with maturity on 7 April 2030.

AIA delivered strong performance in FY2024, showcasing robust capital strength on a consolidated basis despite engaging in share buybacks and dividend payments. The Value of New Business (VONB) surged 18% year-on-year, reaching a record high of US$4.7 billion, with all segments achieving double-digit VONB growth and an expansion of VONB margin by 2.1 percentage points. Operating Return on Equity increased by 130 basis points to 14.8% in 2024.

The solvency position decreased slightly from 275% in FY2023 to 257% in FY2024, mainly due to shareholder-friendly activities. Nevertheless, we expect that AIA will continue to prioritise shareholder returns while maintaining a healthy capital position, bolstered by strong profit generation. The company's credit profile remains robust, driven by effective business execution, strong earnings growth, and a high-quality investment portfolio.

Funds

Multi-asset Funds

Lion-Bank of Singapore CIO Supertrends Multi Asset Fund

The Lion-BOS CIO Supertrends Multi-Asset Fund is a multi-asset strategy that aims to provide income and long-term capital growth by investing in a diversified portfolio of asset classes including global equities, ETFs, global bonds, the writing of equity covered call options and other collective investment schemes. Guided by research from Bank of Singapore’s award-winning Chief Investment Office, the fund takes a rigorous research-based approach to identify quality companies within equities and fixed income with resilient business models and robust fundamentals. The fund also has distribution share classes for investors looking for dividend income.

PIMCO Balanced Income & Growth Fund

The PIMCO Balanced Income & Growth Fund is a global multi-sector strategy that seeks to combine PIMCO’s total return investment process and philosophy with income maximization. The Portfolio construction is founded on the principle of diversification across a broad range of equity and global fixed income securities. The fund has a historical annualised dividend yield of 7.24% p.a.

Note: Past performance figures do not reflect future performance. Dividend figures are from Bloomberg, as of 31 March 2025.

Bond Funds

PIMCO GIS Income Fund

The PIMCO GIS Income Fund is designed for investors who seek steady income with a secondary goal of capital appreciation. It takes a broad-based approach to investing in income-generating bonds. The fund aims to achieve this by employing PIMCO’s best income-generating ideas across global fixed income sectors. The fund has a historical annualised dividend yield of 6.51% p.a.

Note: Past performance figures do not reflect future performance. Dividend figures are from Bloomberg, as of 31 March 2025.

M&G (Lux) Optimal Income

TThe M&G (Lux) Optimal Income Fund is a global bond fund that aims to provide a combination of capital growth and income to deliver a return based on exposure to optimal income streams in investment markets, while applying environmental, social and governance (ESG) criteria. The fund has a historical annualised dividend yield of 5.93% p.a.

Note: Past performance figures do not reflect future performance. Dividend figures are from Bloomberg, as of 31 March 2025.

Equity Funds

AB Low Volatility Equity Portfolio Fund

The AB Low Volatility Equity Portfolio fund is a global equity fund seeking capital growth through securities of companies that the fund manager believes have lower volatility. Its investment approach focuses on quality, stability and price, where the fund seeks high quality stocks of companies with stable performance and predictable earnings, trading at attractive prices. The fund also has distribution share classes for investors looking for dividend income.

Neuberger Berman Global Equity Megatrends Fund

The Neuberger Berman Global Equity Megatrends fund seeks to achieve long-term capital appreciation through investment in a high conviction, global all-cap equity portfolio of an expected 20-30 companies that are directly supported by multiple long-term, global secular shifts. The investment team follows a risk-managed approach to develop conviction, with particular focus on valuation discipline.

LionGlobal Asia Pacific Fund

The LionGlobal Asia Pacific Fund invests primarily in the equities markets of the Asia Pacific (ex-Japan) region across both emerging and developed markets, with no target industry or sector. The fund aims to achieve capital appreciation by adopting a disciplined investment process and a high conviction approach, focusing on identifying growth opportunities at reasonable prices.

Currencies

Barring the short-term bounce in the US Dollar (USD), we expect the greenback to trade weaker against major currencies as fading US exceptionalism and USD re-allocation flows take centre-stage in the immediate term, with the Fed rate cut cycle potentially coming into focus in 2H2025. Markets are increasingly focused on how Trump’s policies (especially tariffs) are hurting the US economy, US assets and the USD. The USD may also trade softer against Asia ex-Japan currencies and the antipodeans i.e. the Australian and New Zealand currencies, but the decline may be more modest than against major currencies, as we take into consideration the potential implications of tariffs on global growth.