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Expect greater volatility but don’t ignore opportunities

Expect greater volatility but don’t ignore opportunities

  • August 2025
  • By OCBC
  • 10 mins

Volatility will remain a fixture in the coming months as investors await greater clarity about the impact of US tariffs on inflation, the US economy and monetary policy. but there is no reason for investors to panic or turn dismal. We remain sanguine on the medium-term investment outlook. Abundant liquidity on the sidelines and the possibility of Fed rate cuts should offer markets with support – making any sharp pullbacks an opportunity to accumulate.

Structured Investments

Chinese Internet and platform companies are key beneficiaries to ride on the acceleration and broadening of artificial intelligence (AI) adoption and the recovery of China’s domestic consumption.

  • Tencent is one of the world’s largest and most innovative companies in the video game, social media, and internet sectors. It serves as a proxy play for AI applications, supported by a clear and well-articulated AI strategy that presents strong upside potential. We view Tencent as the best consumer-facing AI proxy, bolstered by the WeChat super-app, which has already demonstrated early signs of monetisation. Additionally, Tencent has solid fundamentals and a strong competitive advantage across all its business lines, including AI.
  • Trip.com Group Ltd is the largest online travel agency in China, well-positioned to capitalise on the country’s growing demand for higher-margin outbound travel. The company’s innovative use of AI is integral to its dynamic content strategy. In China’s competitive online travel agency industry, Trip.com stands out by offering an extensive selection of both domestic and international hotels, creating a comprehensive platform that fosters strong user loyalty. This approach drives consumer awareness and provides relevant information that makes trip planning easier and safer for travellers. Additionally, Trip.com offers curated lists that help travellers select the best experiences in destinations, including hotels, attractions, restaurants, and nightlife.

Bonds

AIMS APAC REIT focuses on investing in industrial real estate with assets located in Singapore and Australia. Its portfolio consists of about 28 industrial properties, including a 49% stake in a business park property in New South Wales, Australia.

AIMS APAC REIT (SGD)

This perpetual pays a coupon of 5.375% with call date on 1 September 2026.

AIMS APAC REIT (AAREIT) is sponsored by AIMS Financial Group or AIMS. AIMS is a privately owned non-bank financial services and investment group based in Australia.

In terms of revenue, AAREIT’s 2HFY2025 overall revenue increased by 2.9% year on year (YoY). The increase in gross revenue was driven by higher rental and recoveries from AAREIT’s logistics and warehouse and industrial properties, partly offset by lower income from 7 Clementi Loop (undergoing asset enhancement initiatives) and lower revenue from Australian properties due to the weakening of the Australian Dollar against the Singapore Dollar.

While there is no short-term refinancing risk, AAREIT however faces sizeable debt maturing in FY2027, a S$205 million amount that represents a fairly sizeable 35% of reported debt (excluding lease liabilities). Whilst AAREIT only maintains S$14.4 million of cash balance, it has undrawn committed facilities of about S$275 million, which taken together is more than sufficient to cover the FY2027 debt.

AAREIT’s resilient portfolio in Singapore and Australia continues to underpin its credit profile, which helps mitigate its high use of perpetuals. It should be noted that AAREIT is highly exposed to the Logistics & Warehouse sector which in our view is more exposed to potential international trade disruptions. However, we understand from management that a preliminary estimate of AAREIT’s top 20 tenants, which together are significant contributors to AAREIT’s portfolio, indicates that less than 10% of AAREIT’s revenue is exposed to exports to the US.

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 maximisation. 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 7.2% p.a.

Note: Past performance figures do not reflect future performance. Dividend figures are from Bloomberg, as of 31 July 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 6.58% p.a.

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

M&G (Lux) Optimal Income

The 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 5.99% p.a.

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

Currencies

The US Dollar (USD) index (DXY) closed higher in July – its first monthly gain since December 2024. Upside surprise to US economic data has led to chatter of a return of US exceptionalism while markets partially pared back Fed rate cut expectations following the July Fed policy meeting. From a currency point of view, markets had anticipated that Fed Chairman Jerome Powell would make a soft pivot or hint of a rate cut soon. However, there was no such signalling from Powell. Further unwinding of stretched USD shorts may see USD strength persist for a little longer. Over the forecast horizon, we still expect the USD to trade on the back foot amidst the USD diversification/re-allocation trend and as a potential Fed rate-cut cycle comes into focus. However, the USD is not likely to see a repeat of another 10% decline for 2H 2025. The magnitude of decline should moderate and hence the view that the USD’s decline will not be one way and is likely to be bumpy going forward.