– – –

Highlights:

#1
For May 2023, Airo-BOCA composite was down -3.84% while MSCI All Country World Index (ACWI) was down -1.05% and S&P500 Index (SPX) was up +0.25% respectively. Airo’s mark-to-market unrealized loss was due to the short positioning in the technology sector that continued to be driven up by a handful of technology stocks.

#2
As an example, NVIDIA continued its relentless rally on the Artificial Intelligence theme and is currently trading at a PE of 190x. NVIDIA plus a handful of other technology stocks had promptly driven up the performance of Nasdaq100 index that could be dangerously unsustainable from a valuation fundamental perspective.

#3
On a YTD basis, the number of S&P500’s stocks that are closing above their 200-day moving average have been consistently declining. This means that the broader market is not really participating on the YTD rally, apart from the handful of technology stocks as mentioned.

#4
On a macro level, however, data continued pointing to growth contraction instead. ISM Manufacturing PMI contracted to a new low in May while ISM Services PMI was nearing the growth contraction zone. Although the U.S equity return may look impressive, macro fundamental is nonetheless driven by hard data that paints the real picture of the underlying economic cycle’s dynamic.

#5
Airo remains steadfast that the macro-fundamental shall prevail eventually. As such, we maintain our current portfolios’ conviction to potentially capture the alpha that is intended in the first place.

– – –

Dear Valued Investors,

For May 2023, Airo-BOCA composite was down -3.84% while MSCI All Country World Index (ACWI) was down -1.05% and S&P500 Index (SPX) was up +0.25% respectively. Airo’s mark-to-market unrealized loss was due to the short positioning in the technology sector that continued to be driven up by a handful of technology stocks.

Table 1: On a year-to-date basis, Airo-BOCA returned -0.93% (As of May 2023)

Source: Interactive Brokers, Airo Malaysia, Bloomberg.

As an example, NVIDIA continued its relentless rally on the Artificial Intelligence’s theme and is currently trading at a PE of 190x. NVIDIA plus a handful of other technology stocks had promptly driven up the performance of Nasdaq100 index that could be dangerously unsustainable from a valuation fundamental perspective.

Chart 1: NVIDIA ~ trading at PE 190x after its recent rally!

Source: Airo Malaysia, Bloomberg.

In fact, on a YTD basis, the number of S&P500’s stocks that are closing above their 200-day moving average have been consistently declining. This means that the broader market is not really participating on the YTD rally, apart from the handful of technology stocks as mentioned. The immediate implication is that this is hardly the classic bull-market that you want to see!

Chart 2: Percentage of S&P500 Stocks Closing Above 200-day Moving Average

Source: Airo Malaysia, The Wall Street Journal.

On a macro level, however, data continued pointing to growth contraction instead. ISM Manufacturing PMI contracted to a new low in May while ISM Services PMI was nearing the growth contraction zone. This pointed to a significant divergence between the macro growth trajectory and the U.S equity market’s performance. While the latter looked impressive, macro fundamental is nonetheless driven by hard data that paints the real picture of the underlying economic cycle’s dynamic.

Table 2: ISM Manufacturing PMI ~ growth contraction continued in May

Source: Airo Malaysia, Bloomberg.

Table 3: ISM Services PMI ~ nearing growth contraction zone i.e. almost below 50

Source: Airo Malaysia, Bloomberg.

Airo remains steadfast that the macro-fundamental shall prevail eventually. As such, we maintain our current portfolios’ conviction to potentially capture the alpha that is intended in the first place.

June 6th, 2023
William Yii
CIO, Airo Malaysia

– – –

Disclaimer: Airo is a brand of BH Global Fintech Solutions Sdn Bhd (“BHFS”), licensed by the Securities Commission of Malaysia as a Digital Investment Management company. BHFS is authorised to carry out the business of fund management incorporating innovative technologies into automated discretionary portfolio management services offered to clients under a license issued pursuant to Schedule 2 of the Capital Markets Services Act 2007.

All investing involves risk, including the possible loss of money you invest, and past performance does not guarantee future performance. Historical returns, expected returns, and probability projections are provided for informational and illustrative purposes, and may not reflect actual future performance. BHFS assumes no responsibility for liability for your trading and investment results. It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable, or that they will not result in losses. Past results of any trading system published by BHFS, are not indicative of future returns by that system, and are not indicative of future returns which will be realized by you.