By Henry Soediarko and Alexander Kalis
As we reflect on November 2023, it is evident that the month was characterised by significant shifts in both the global markets and the realm of climate impact investing. Let us delve into the key developments and their implications.
Market Dynamics and Economic Indicators
The month witnessed a noteworthy shift in the Dollar index, which declined by 3% after a prolonged period of increase. This movement brought a semblance of stability to the equity markets, although the Dollar remains elevated compared to the start of the year. In the commodities market, gold prices reached a historical high of USD 2,036, signalling potential concerns about the long-term sustainability of such price levels in the context of prevailing economic narratives.
The energy sector also experienced notable fluctuations, with crude oil prices retreating from their September peak. This decline, potentially indicative of a more optimistic market outlook, suggests anticipation of a resolution to ongoing global conflicts and their impact on energy resources.
Strategic Movements in Key Asian Markets
In Asia, the investment landscape was influenced by regulatory and economic developments. South Korea’s introduction of a short selling ban, applicable solely to new positions, prompted strategic shifts in market approaches. Japan’s market dynamics, influenced by a weaker Yen, presented opportunities, particularly for companies like Murata in the MLCC sector, which benefited from the currency trend.
In South Korea, the wind tower manufacturer CS Wind demonstrated resilience in the face of market volatility, rebounding significantly in Q3. Conversely, a strategic decision was made to reduce exposure in Sembcorp Industries following its share price rally in November.
Sector Highlights
The climate impact investment space saw varied performances across different sectors. Companies like SK IE and Xpeng, with a focus on electric vehicles and assisted driving systems, showcased the potential and innovation within the low-carbon transport sector. Kurita Water’s performance in water treatment also highlighted the opportunities in sustainable infrastructure.
Outlook
Looking ahead, the investment landscape appears set for continued development, particularly in the context of legislative changes such as the US Inflation Reduction Act. This act is expected to influence investment strategies, especially in regions like South Korea. In Japan, the potential for increased retail investor participation alongside currency dynamics presents interesting prospects. In China, a selective approach is being adopted, focusing on companies with strong potential and clear catalysts.
Reflecting on COP28 and Its Implications
The COP28 conference in Dubai brought critical discussions on climate policies and the transition to a low-carbon economy to the forefront. The establishment of a loss and damage fund, and ongoing debates about fossil fuel reduction commitments, underscore the intricacies of aligning global strategies with environmental goals. The difficulties in finding a consensus for phasing out fossil fuels further highlight these complexities. These developments are particularly relevant for Asia, a region integral to global climate efforts.
Conclusion
November 2023 has been a month of adaptation and strategic recalibration in the face of changing market conditions and environmental imperatives. The insights gained from these developments will continue to shape investment strategies, underscoring the importance of staying informed and responsive in a dynamic global landscape
