A rollercoaster that was 2020, as COVID-19 dominated the world.

It would be an understatement to say that 2020 was a year that was full of ups and downs. As we kick started the year, the coronavirus had just been discovered in Wuhan, China and quickly spread across the globe, putting it into a total lockdown as we battled against the worst pandemic in a century in a matter of months. Markets went into a deep dive into the negative, as uncertainties of the pandemic sent investors scrambling for cash.

As the year 2020 ended, the virus was (and is) still raging at alarming rates across the world, while COVID-19 vaccine distribution has already begun in some countries; we are also seeing major US indices hitting fresh highs.

The world scrambled to find a vaccine, as the world fought to keep the virus as bay.

When the virus broke out, governments around the world imposed total lockdowns as the virus rampages across the globe; until in July, as various parts of the world gradually started economy reopening measures, only to be faced with a second wave of the virus, which infected more people, and at a higher rate, causing highly affected areas to go into lockdown once again.

However, light could be seen at the end of the tunnel when Pfizer, in collaboration with BioNTech first announced its vaccine candidate’s efficacy rate of 91%, while other labs followed suit in reporting significantly high rates of efficacy. The UK became the first to start widespread distribution of the vaccine first in December.

Markets fell into deep recession, but also reach record highs.

Financial markets fell deep when the virus started to cause lockdowns in many parts of the world, as investors scrambled to sell off assets, even low risk treasuries and gold, were not spared. However, what was the deepest dive in markets recovered remarkably fast, once markets were able to gauge that the worst was over.

China: An unexpected winner.

Lockdown measures first implemented by the Chinese government were proved necessary when the virus started spreading across the globe and the WHO officially declared it a pandemic. By April, the whole world followed suit, implementing lockdown measures that they once criticised.

By then, China had managed to curb the spread of the virus and started reopening its economy; it hasn’t looked back since. The early adaptation into online shopping and high internet penetration rate made lockdowns easier for the Chinese, as e-commerce players were able to cater to both larger orders and geographical distance by implementing an efficient and effective supply chain.

Economic recovery continued in China as the world battled against the virus, with the IMF predicting the country to be the only one to experience growth in 2020, with a forecasted expansion of 1.9%. In comparison, global GDP is expected to shrink 4.4% in the same period.

In addition to that, the country’s prolonged tensions with the US saw the Chinese government reiterating its intention to be independent from global supply chains, focusing on boosting domestic demand and consumption, largely benefiting the New China Economy. The TradePlus S&P New China Tracker (0829EA), which focuses on consumption and services sector saw 35.68% gains in 2020 and continues to hit record highs as we enter the new year.

 In the US: Tech triumphs all

As the world went into lockdown, so did businesses and offices. Catering to the sudden spike in demand, tech companies such as Google and Facebook acted swiftly to create platforms that are work-from-home (WFH) friendly; such as cloud services and virtual meeting rooms to make the transition from the office to home easier.

Outside of work, tech names continued to benefit from stay-at-home measures, as people turned to entertainment inside their homes to cope with the lockdown. Companies that offered entertainment like streaming services and online gaming also saw significant growth in profits.

Meanwhile, e-commerce giants replaced traditional retail shopping to supply US citizens with the essential supplies that was needed throughout lockdown. Companies like Amazon profited handsomely from the pandemic as shoppers turned online for groceries and shopping to be delivered to their doorstep. 

Throughout the year, the tech focused Nasdaq Composite index significantly outperformed major benchmark indices, raking in 41.18% returns in MYR terms compared to the S&P 500 index and Dow Jones Industrial Index, which rose 14.27% and 5.41% respectively.

However, a certain tech index managed to outperform even the Nasdaq Composite index: FANG+. The FANG+ index, which comprises of 10 largest tech stocks listed in the US, namely Facebook, Apple, Amazon, Netflix, Google, Alibaba, Baidu, Nvidia, Tesla, and Twitter managed to return an impressive 99.41% throughout the year; while the TradePlus NYSE FANG+ Daily 2x Leveraged Tracker, which aims to provide 2x the daily returns to the index, saw gains of 168% in 2020.

Locally: Glove heavyweights dominated the market.

When we first grappled with the health crisis, the scramble for Personal Protective Equipment (PPE), medical masks and gloves caused massive shortages throughout the world. Malaysia, being the largest rubber glove exporter saw a sudden surge in order books for the product, which caused a soar in prices in glove making companies, namely Top Glove, Supermax, Hartalega and Kossan Rubbers.

Political uncertainties also dominated local headlines in 2020, as the Pakatan Harapan government was overturned by Pakatan Perikatan led by Tan Sri Muhhyidin Yassin, whose government was forced to face the effects of the pandemic; followed by the Sabah elections which solidified the party’s position in the country.

The newly listed TradePlus DWA Malaysia Momentum, which uses Point and Figure Charting to identify momentum trends in the market managed to achieve its objective despite a tumultuous year filled with uncertainties, as the 0836EA, generated a positive return of 6.98% since its inception in July, while the broader KLCI index rose 2.42% throughout the year. 

2021: What is ahead of us?

While the raging virus is not showing any signs of slowing down, financial markets have already begun its rotation into recovery play, as widespread distribution of the vaccine is kick started around the world. While we are not expecting herd immunity worldwide anytime soon, consensus is that the vaccine will help to ease the burden of the economy and play a significant part in getting life back to normal again. The MSCI Asia ex Japan REITs tracker (0837EA), which includes high-yielding REITS names in the Asia ex Japan region will be able to benefit from economic recovery, as the world tries to regain normalcy and bring life back to normal again.

Table 1: Price Performance of TradePlus ETFs

  

Table 2: Price Performance of Indices

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