SIP LIFESTYLE PORTFOLIOS FACT SHEET (DEC 2016) SIP Aggressive Portfolio SIP Aggressive Portfolio is a unitized fund, which is designed to provide long term capital growth. It is designed for those who hold a long term investment view and who are prepared to accept significant fluctuations in the value of their investment in order to achieve long term returns. MGF - American Growth Fund (A Share) 38.9% MGF - US Small Cap Equity Fund (AA Share) 15.4% MGF-Global Property Fund (AA Share) 2.0% MGF-European Growth Fund (A Share) 14.0% MGF-Japanese Growth Fund (A Share) 5.1% MGF-Asian Equity Fund (A Share) 1.7% MGF-Global Resources Fund (AA Share) 5.2% MGF-US Bond Fund (AA Share) 7.1% MGF-US Special Opportunities Fund (AA Share) 10.4% MGF-US Treasury Inflation-Protect Fund (AA Share) 3.1% Information Liquidity and others -2.9% Investment Management Fee : 1.40% per annum NAV per Unit 1.2262 5.52 million : 4.50 million SIP Growth Portfolio SIP Growth Portfolio is a unitized fund, which is designed to provide medium to long term capital growth for those who hold a long term investment view and who are prepared to accept considerable fluctuations in the value of their investments in order to achieve long term returns. Aggressive Portfolio 1 Month 1.52% 3 Months 2.00% 6 Months 7.46% YTD 6.44% 1 Year 6.44% 3 Years 1.06% 5 Years 32.28% Since Inception 22.62% MGF - American Growth Fund (A Share) 32.9% MGF - US Small Cap Equity Fund (AA Share) 4.1% MGF-Global Property Fund (AA Share) 7.2% MGF-European Growth Fund (A Share) 8.3% MGF-Japanese Growth Fund (A Share) 2.9% MGF-Asian Equity Fund (A Share) 1.1% MGF-Global Resources Fund (AA Share) 5.2% MGF-US Bond Fund (AA Share) 18.2% MGF-US Special Opportunities Fund (AA Share) 16.6% MGF-US Treasury Inflation-Protect Fund (AA Share) 5.2% Information Liquidity and others -1.6% Growth Portfolio 1 Month 1.16% 3 Months 0.49% Investment Management Fee : 1.30% per annum 6 Months 4.35% NAV per Unit 1.2608 YTD 4.92% 5.21 million 1 Year 4.92% : 4.13 million 3 Years -0.39% 5 Years 25.45% Since Inception 26.08%
SIP Balanced Portfolio SIP Balanced Portfolio is a unitized fund, which is designed to provide medium to long term capital growth for those who hold a long term investment view and who are prepared to accept fluctuations in the value of their investments in order to achieve long term returns. MGF - American Growth Fund (A Share) 20.1% MGF - US Small Cap Equity Fund (AA Share) 4.0% MGF-Global Property Fund (AA Share) 5.0% MGF-European Growth Fund (A Share) 7.7% MGF-Japanese Growth Fund (A Share) 2.6% MGF-Asian Equity Fund (A Share) 0.9% MGF-Global Resources Fund (AA Share) - MGF-US Bond Fund (AA Share) 42.1% MGF-US Special Opportunities Fund (AA Share) 13.4% MGF-US Treasury Inflation-Protect Fund (AA Share) 4.0% Information Liquidity and others 0.1% Balanced Portfolio 1 Month 0.80% 3 Months -0.55% Investment Management Fee : 1.20% per annum 6 Months 2.46% NAV per Unit 1.2884 YTD 3.06% 4.60 million 1 Year 3.06% : 3.57 million 3 Years -0.17% 5 Years 20.27% Since Inception 28.84% The SIP Lifestyle Portfolios are managed by Manulife Asset Management Services Berhad and are fund of funds structures. They invest all or substantially all of their assets into the Underlying Funds under the Manulife Global Fund platform. Please refer to the for the list of the Underlying Funds and the allocation for the respective portfolios. Past performance is not an indication for future results. This report is prepared for information purposes only. Important Notes: The fund performances are strictly the performance of the investment-linked (IL) fund and not to be treated as the gross premium/contribution of the IL insurance product. In the event of exceptional circumstances, such as high volume of sale investment within a short period of time, Manulife Insurance Berhad ("the Company") reserves the right to defer or suspend issuance or redemption of units. Page 2 of 5
and Outlook (Dec 2016) Asia Pacific ex Japan Asia Pacific ex Japan small cap equities declined during the month due to China and Hong Kong s underperformance. Liquidity conditions in China tightened as onshore bond market yields went higher due to concerns of currency depreciation, which in turn may trigger capital outflows. The liquidity crunch effects spilled over to Hong Kong. Oil prices moved higher as 11 non-opec countries committed to production cuts. China recorded strong economic activity in November in terms of manufacturing Purchasing Managers Index (PMI), industrial production, retail sales, and fixed asset investments. Producer Price Index (PPI) remained in positive territory for the third consecutive month in November, and was at its fastest pace in five years. November exports were positive after seven months of declines. The Shenzhen-Hong Kong Stock Connect was also launched during the month. Taiwan exports in November grew at its fastest pace in almost four years due to higher seasonal demand for hi-tech gadgets. The government is planning to invest NT$170 billion (US$5.3 billion) in information technology development. In South Korea, the parliament voted to impeach the President, who was then immediately suspended from her duties. November PMI was flat after falling for four consecutive months. The Finance Ministry noted that the government will front load spending for the first of half of 2017 to support the economy. Singapore industrial production in November increased above expectations, driven by strong biomedical and electronic outputs. Thai exports growth in November was the highest in nine months on the back of an improving global trade environment led by the US and Japan, as well as normalising oil prices. The governmentexecutedacabinetreshuffle amovewelcomedbyinvestors toimprovepolicyimplementationtowards Thailand4.0,amoredigitaland industrial economy. Indonesia exports in November grew by 21.3% year-on-year led by coal and crude palm oil exports to India and China. The second phase of the tax amnesty programme ended, where additional revenues amounted to IDR14.1 trillion (for a total of IDR103.3 trillion). Bank Indonesia kept the benchmark interest rate unchanged after cutting six times this year. Malaysia industrial production in October was strong on the back of the manufacturing, mining, and electricity sectors. The Reserve Bank of India kept the policy rate unchanged which surprised many analysts expecting a cut as it continues to assess the effects of the recent demonetisation on the economy. The Goods & Services Tax Bill (GST) implementation was delayed due to the lack of consensus on key concerns during the winter session. Australia third quarter GDP growth at 1.8% year-on-year was below consensus forecast. The Reserve Bank of Australia left the cash rate unchanged. It sees the current policy settings as appropriate for achieving economic growth and inflation targets. The outlook for 2017 is expected to be shaped by the expectations of higher energy prices and a stronger US dollar, which should lead to an inflationary environment. Against this backdrop, interest rates in the US are expected to trend higher, while interest rates in Asia ex-japan economies are to stay at current levels if not higher. The pace of depreciation of the renminbi remains a key factor to watch out for. There is risk that the currency may overshoot to the downside and concerns may ripple through the region. That said, over the longer term, we believe the Chinese economy s fundamentals should provide support to the RMB and any panic reaction should be short-lived. The outlook for South East Asia, especially Indonesia, is expected to improve further from 2016. The government of Indonesia has made good progress in reforms and the country s economy is more resilient to external shocks compared to the first taper tantrum. The oil price recovery should also provide some relief to Malaysia s fiscal position and an imminent election should provide near term support to economic activities. While India s economy is expected to slow following the demonetisation programme, we believe the country s current short term pain paves the way for a long term gain in terms of economic development. Amid rapid change in market dynamics, opportunities in Asia still appear compelling relative to those in the developed markets. Earnings revisions are turning positive and valuations remain reasonable. A more stable currency, as well as a benign interest rate and inflation environment provide further appeal to the region. North America US stocks continued their post-election climb in December. Consumer sentiment improved amid expectations of President-elect Trump s plans for infrastructure spending, deregulation, and fiscal stimulus promoting economic growth. The Fed inched its federal funds rate higher, while outlining the potential for three more rate increases in 2017. Among the biggest gainers in the S&P 500 Index were the telecommunication services, utilities, real estate, and financials sectors. By contrast, the consumer discretionary, materials, industrials, and healthcare sectors were laggards. We remain positive. US consumer debt levels are the lowest in over a decade. There was near full employment, the fastest consumer wage growth in over five years, and the highest level of consumer confidence since 2001. Given this backdrop, we expect increased consumer spending, which typically drives about twothirds of US economic growth. We anticipate an added boost to the economy from the incoming administration s pro-business stance. The Fund has sizable albeit slightly reduced overweights in the consumer discretionary and financials sectors. Europe The European market rallied strongly in the final month of 2016. Italian Prime Minister Matteo Renzi resigned in the wake of the country s No vote in the constitutional referendum, without it leading to the crisis of confidence in Italian sovereign debt or bank credit that some had predicted. In Austria, the presidential election victory for the centrist candidate mitigated fears that a populist backlash could engulf Europe. The European Central Bank (ECB) announced that it might taper quantitative easing in 2017, while the Fed increased interest rates by 0.25% and forecast three further rate increases over the next 12 months. The divergence in monetary policy weakened the euro, which fell by 0.6% against the US dollar. The Bank of England kept record-low rates on hold, driving the British pound down by 1.1% against the US dollar. There was broad sector strength, with energy-sector stocks continuing to climb after the production cuts announcement by OPEC at the start of the month. In the short-term, we expect the Eurozone economy to record further declines in unemployment and accelerating GDP growth in 2017. We believe European corporates offer solid earnings growth potential from improving consumer demand, higher commodity prices, and a weaker currency. Core European inflation is still well short of the ECB s target rate of 2%, but is starting to pick up. This allows yield curves to steepen, which is important not only for share prices to perform in the financial sector, but also for the smooth functioning of the wider economy. Page 3 of 5
and Outlook (Dec 2016) (continued) In the medium to long-term, we believe high debt levels globally mean the developed economies remain highly sensitive to input factors such as commodity prices, currency levels, and the interest rates. Should these factors increase significantly in 2017, a faltering economy could prevail. While the fundamental economic backdrop is reasonable in the short term, all eyes in 2017 will likely be on political developments taking place in Europe and North America. First, the UK prime minister has committed to triggering the UK s formal exit from the EU and the start of exit negotiations by March 2017. Next year will also likely see general elections held in France, Germany, and the Netherlands. The rash of geopolitical unrest in 2016 has created fertile ground for conservative politicians to win support. We believe successful polling for these parties would be unsettling for equity investors as it may pave the way for a rerun of the UK's Brexit referendum, this time by a continental European country. The new US presidential administration will also likely be in the spotlight as investors determine whether it will follow through on its bold campaign promises to boost fiscal spending, cut taxes, and repatriate manufacturing jobs, or take a more moderate stance once in power. In these uncertain political times, our approach is to stick to the lodestone of company-specific stock analysis and seek good businesses that trade at a discount to their long-term cash generation. Ultimately, we believe buying good companies when they are out of favour will likely deliver better returns for investors than trying to second-guess the outcome of elections and the market's responses to them. The futility of trying to position around these events was shown by the US election, which doubly confounded market expectations when Trump won and equities posted gains. Japan Despite the market continuing to rally in local currency terms (+3.5%), the yen continued to weaken, causing the index to rise just over 1% in Hong Kong dollar terms. The aftermath of the US election continued to put upward pressure on global bond yields. The exception was in Japan where the Bank of Japan maintained its zero target on 10-year bond yields. The rising oil price has also begun to put significant upward pressure on inflation with Japan Consumer Price Index (CPI) rising from -0.5% to +0.5% over the last two months. The jobs-to-applicants ratio also rose to its highest level of 1.41 (close to the previous peak of 1.44 in December 1990). Despite the yen weakness, it was domestic sectors such as financials, utilities and telecoms that performed best. The weakest sectors included tires, paper and air transport. Among the top performers for the month were some companies related to semiconductor production, including Advantest and Sumco. Mitsubishi Motors also performed well after Carlos Ghosn was named chairman and Nissan announced that it would adopt Mitsubishi Motors hybrid technology in its cars. The weakest performer of the month was Toshiba after it revealed that there were large unaccounted liabilities associated with two nuclear projects in the US which were being built by a company Toshiba acquired in December 2015. Improving global trade, the weaker yen, and government spending in the run-up to 2020 Olympics should all help drive earnings growth in 2017. Earnings growth stagnated in 2016 as the yen strengthened and companies struggled to grow sales both at home and overseas. The outlook is quite different for 2017. The government has recently upgraded its real GDP outlook for the year ahead from 1.2% to 1.5% and overseas demand looks better with Chinese PPI (Producer Price Index) rising sharply into positive territory. We are expecting earnings growth for 2017 to be ahead of consensus. Japan remains the cheapest developed market on both price-to-earnings and price-to-book. Japan s return on equity (ROE) has also been steadily improving and currently stands at 8.5%. We believe this could reach over 10% in 2017. Although this remains below the US, it is on a faster growth path. One of the drivers for higher ROE is the record level of share buybacks. The majority of Japanese corporates have a net cash position giving them ample opportunity to make further buybacks in 2017. Global As 2016 concluded, global equity markets advanced to end the year on a high note. Investor optimism following the November US presidential election continued into December as the MSCI World Index gained 2.4%. The Fed raised interest rates for the first time since December 2015, signalling confidence in the strength of the US economic recovery. The European Central Bank (ECB) also met and extended its quantitative easing programme, albeit on a reduced scale. Defensive sectors were in favour. Utilities and telecommunication services were the best-performing sectors, while industrials was the weakestperforming sector. Globally, Europe was the strongest-performing region, while emerging markets ended the month flat. We believe that equity markets could remain volatile. The global challenges of deflation risk, excess debt, and political uncertainty could overwhelm the possibility of global economic growth. Both Brexit and the US presidential election results surprised equity markets in 2016. We believe there could be more uncertainty in 2017 as the Netherlands, France, and Germany go to the polls. We believe the future direction of Europe, and by implication the euro, has become uncertain. Should Mario Draghi, President of the ECB, see out his mandate, he would still step down in October 2019. In our view, this suggests that eurozone monetary policies could remain accommodative for an extended time. Investors desire for yield, at least in continental Europe, should therefore remain strong. In Europe, we believe there will be further calls for fiscal spending, which would have to be accomplished against the constraint of excess debt. The Japanese market, generally a beneficiary of cyclical recovery, has benefited from the US election results and from a weakening yen. We believe there will be implications for Japanese equity markets if the Bank of Japan targets the yield curve and keeps the 10-year bond rate at zero. We believe unlimited buying of Japanese government bonds would be negative for the yen and positive for equities. On average, US and European companies have returned to pre-2008 debt levels, with debt-adjusted multiples stretched to multi-year highs. Japan is the exception, where multiples are high due to quantitative easing driving up asset prices amid falling operating earnings. Companies have taken advantage of the low interest rates to issue debt for buybacks and, increasingly, for mergers and acquisitions. Given this, we believe some caution is warranted. A new direction for the US will take some time to be implemented and any impact on the companies held by the Fund could take even longer. Furthermore, we believe any rotation away from quality and into more traditional value sectors will be highly dependent on the potential for an economic recovery. We also believe that earnings growth would have to recover to reduce future multiples to more acceptable levels. We will keep monitoring the continued strength of the US dollar, which could dampen an economic recovery. This is particularly relevant for emerging markets. Emerging markets are typically more sensitive to growth expectations, but they also tend to struggle when the US dollar is strong. We remain wary of excess debt and will continue to focus on companies with what we believe to be sustainable cash flow streams. We will also continue focusing on quality and valuation to uncover opportunities that we believe have upside potential, but are trading at lower multiples than the broader market. Page 4 of 5
SIP Lifestyle Portfolio (Dec 2016) (continued) Investment in the fund is subject to certain risks, including but not limited to: Risk Type Description Risk Management (Bond funds) Risk Management (Equity funds) Fund Management Risk The selection of securities which make up the investments of the fund is subjective and securities selected may perform better or worse than overall market. To mitigate this risk, the investment Manager has in place a disciplined investment process and practices prudent risk management. Manager has in place a disciplined investment process and practices prudent risk management. In addition, risk is also monitored through risk models. Liquidity Risk Market or Price Risk Timing Risk Company / Stock Specific Risk Interest Rate Risk The risk of the funds being unable to meet their obligations at the reasonable cost or at any time. Market risk arises when the value of the securities fluctuate in response to the general market and economic conditions. The risk is subject to the volatility of the market/interest rate. The risk of loss due to the fall of stocks/shares prices given the deteriorating business condition. Manager will review and monitor the Fund continuously, and actively manage asset allocations of the Fund. In addition, the investment Manager will practice prudent liquidity management to enable the Fund to meet short term obligations. The Investment Manager will attempt to diversify the portfolio, and monitor the investment climate and market conditions to take measures, where necessary and appropriate, to mitigate this risk. The Investment Manager will manage it based on its professional knowledge and experienced investment skill. The interest rate is a general economic This risk will be mitigated via the N/A indicator that will have an impact on the management of the duration of the management of the Fund. This risk refers fixed income securities. to the effect of interest rate changes on the market value of fixed income securities. In the event of rising interest rates, prices of fixed income securities will decrease and vice versa. Meanwhile, fixed income securities with longer maturities and lower coupon/profit rates are more sensitive to interest rate changes. N/A Manager will review and monitor the Fund continuously, and actively manage asset allocations of the Fund. In addition, the Investment Manager will practice prudent liquidity management. This risk is managed through sector/stock diversification and asset allocation. Timing risk will be managed via technical tools (i.e. from Bloomberg) as well as based on the Investment Manager's professional knowledge and experience investment skill. Manager will be performing continuous research and analysis on the balance sheet strength, earnings generation capability and strength of management team of the company. Inflation Risk Credit Risk This is the risk that investors' investment The risk may be mitigated by investing N/A in the Fund may not grow or generate in fixed income securities that can income at a rate that keeps pace with provide positive real rate of return. inflation. The risk of loss due to the counter party's Credit risk may be managed by N/A inability to make payment of coupon/profit performing continuous fundamental and/or principal. credit research and analysis to ascertain the creditworthiness of its issuer. Page 5 of 5