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Opportunities can still be found despite macro uncertainties July 2025

Opportunities can still be found despite macro uncertainties July 2025

  • July 2025
  • By OCBC
  • 10 mins

Structured Investments

Theme: Increased Defence Spending

The 2025 NATO Summit, held in The Hague, concentrated on boosting defence expenditures and enhancing the alliance's capabilities. Member countries pledged to allocate 5% of their GDP to defence by 2035. The summit also covered support for Ukraine, cooperation in transatlantic defence industries, and strategies to combat hybrid threats.

  • Thales is a French aerospace and defence company and one of the largest defence contractors in Europe. The company’s business is well diversified, with 48% of its revenue generated from civil sectors and 52% from defence. Rising global security concerns, heightened by the conflict in Ukraine, are fueling sustained growth in the defence market.
  • Lockheed Martin is the world’s largest defence contractor and has led the Western market for advanced fighter aircrafts since securing the F-35 Joint Strike Fighter program in 2001. The company’s involvement in the F-35 program, hypersonic missile development, and space militarisation positions it strongly within the key spending priorities of the US defence budget.

Bonds

Temasek Holdings Pte Ltd was founded by the Singapore government in 1974 with the purpose of managing and overseeing its commercial investments. While the government does not engage in the day-to-day operations of Temasek, it maintains oversight by holding the company's management and board accountable for their performance and the protection of Singapore's past reserves.

Temasek Financial I Ltd (SGD)

This bond pays a coupon of 4.0475% with a maturity date on 5 March 2035.

Temasek Holdings has a diverse portfolio of listed and unlisted investments, with 48% and 52% of its net assets in each category, respectively. Managed both directly and through third-party fund managers, Temasek follows a long-term investment strategy that prioritises resilience against short-term market fluctuations, aiming for sustainable returns.

Over the past decade, it has achieved an annualised return of 6.0%, with 7.0% over 20 years and 14.0% since inception, alongside cumulative net investments of S$57 billion in the last ten years.

Temasek's financial strength is highlighted by its high credit ratings: Aaa (Stable Outlook) from Moody’s and AAA (Stable Outlook) from S&P Global, both aligned with Singapore's sovereign rating. These ratings reflect its status as a government-related entity, with both agencies acknowledging a strong likelihood of extraordinary government support in the unlikely event of financial need, further enhancing the stability of its investment framework.

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 7.01% p.a.

Note: Past performance figures do not reflect future performance. Dividend figures are from Bloomberg, as of 30 June 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 6.55% p.a.

Note: Past performance figures do not reflect future performance. Dividend figures are from Bloomberg, as of 30 June 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 6.01% p.a.

Note: Past performance figures do not reflect future performance. Dividend figures are from Bloomberg, as of 30 June 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

For the month of June, the US Dollar (USD) initially saw mild demand on geopolitical escalation in Middle East, but demand quickly faded after a ceasefire in the Israel-Iran conflict. Subsequently, the USD took a turn lower, with the USD Index (DXY) testing more than a three-year low into month-end. Some of the factors that contributed to renewed USD selling pressure include tentative optimism about trade talks, prospects of rate cuts by the US Federal Reserve (Fed) and softer US data (reinforcing the view that US exceptionalism is eroding), while geopolitical concerns took a back seat. Recent comments from Fed officials have indicated that a rate cut in July is a possibility. In the near term, reciprocal tariffs remain a key focus, as markets watch for potential new deals or extensions. We continue to expect the USD to trade weaker as the USD diversification/re-allocation trend takes centre-stage while potential for a Fed rate-cut cycle comes into focus in 2H2025.