Overview

  • Escalation of conflicts drive market volatility
  • Bumpy ride for global growth
  • Central banks take turns to cut rates

 

1) Escalation of conflicts drive market volatility

There has been no clear sight of the dust settling from uncertainties that global financial markets continue to grapple with. Trade talks between the US and China are still on-going, although the latest round of additional tariffs that President Trump tweeted about has been delayed. But with the erratic behavior of the US President, there is no discounting the element of surprise in what lies ahead. With the President’s tweets causing such big swings in the global financial markets, JP Morgan created the “Volfefe” Index to track the impact of the President’s tweets on Treasury yields.

Geopolitical tensions in the Middle East, whereas, has escalated further after a drone attack on an oil facility plant in Saudi Arabia. The attack led to a supply disruption from the facility’s output, leading to a spike in oil price. But news of a restoration in almost half the output by the facility before the week was even over caused prices to plunge. Investors have stayed cautious on the situation, fearing a possibility of further escalation to the already tense situation there.

 

2) Bumpy ride for global growth

The underlying current of uncertainties is expected to drag global growth slower. Import numbers were seen waning in the 2 largest economies, the US and China, as trade negotiations remain unresolved. Trade dependent countries took a bigger hit, while political disputes have taken its toll on certain economies.

The protests in Hong Kong continues with escalating violence despite the withdrawal of the extradition bill as anti-government protesters complain about perceived interference from China. The prolonged protests have caused investors to shy away, leaving tourism numbers to fall drastically this year. Analysts have already forecasted slower GDP growth caused by the unrest.

 

3) Central banks take turns to cut rates

Interest rate cuts by global central banks provided a clear indication of a more accommodative stance in a bid to boost economic activity. This year, we have seen emerging market central banks go on a easing cycle, with Malaysia, India, and the Philippines cutting its benchmark interest rates further as it grapples with slowing economic growth.

In the spotlight, the US Federal Reserve started reducing its benchmark interest rates for the first time in a decade. Its first interest rate cut for 2019 came in July, with the 2nd in September to bring its benchmark lending rate to a target range of 1.75% to 2.0%.

With approximately USD 15 trillion worth of bonds already offering zero to negative yields, it is seen that investors are easing in to the idea of zero, or even negative returns indicating that the lower interest rate environment will likely continue in the near term.

 


Market performance thus far

Index YTD (%) 1-month (%) 3-months (%)
Shanghai Shenzhen CSI 300 Index 34.63 5.50 8.23
S&P 500 21.56 4.27 3.56
S&P New China Sectors Ex A Share Index 18.70 5.69 5.13
Gold (LBMA Gold Price AM) 16.63 -0.60 11.72
MSCI China 14.96 5.94 3.65
Hang Seng Index 9.97 4.63 -1.22
MSCI Asia ex Japan 9.89 4.97 1.37
FTSE China 50 Index 9.56 6.06 1.10
Korea Stock Exchange 3.48 7.45 -1.08
FBM KLCI -1.70 0.80 -2.32

Source: Bloomberg as at 18 September 2019. All returns are total returns, and quoted in local currency terms.

 

Gaining access

Learn more about how you can easily gain access to some of the above indices through exchange-traded funds from TradePlus by Affin Hwang Asset Management Berhad.

www.tradeplus.com.my
www.facebook.com/AHAMCapital/
#ahamcapital
customercare@affinhwangam.com

 


Disclaimer: This article has been prepared by AHAM Asset Management Berhad (“AHAM Capital”) specific for its use, a specific target audience, and for discussion purposes only. All information contained within this presentation belongs to AHAM Capital and may not be copied, distributed or otherwise disseminated in whole or in part without written consent of AHAM Capital. The information contained in this presentation may include, but is not limited to opinions, analysis, forecasts, projections and expectations (collectively referred to as “Opinions”). Such information has been obtained from various sources including those in the public domain, are merely expressions of belief. Although this presentation has been prepared on the basis of information and/or Opinions that are believed to be correct at the time the presentation was prepared, AHAM Capital makes no expressed or implied warranty as to the accuracy and completeness of any such information and/or Opinions. As with any forms of financial products, the financial product mentioned herein (if any) carries with it various risks. Although attempts have been made to disclose all possible risks involved, the financial product may still be subject to inherent risk that may arise beyond our reasonable contemplation. The financial product may be wholly unsuited for you, if you are adverse to the risk arising out of and/or in connection with the financial product. AHAM Capital is not acting as an advisor or agent to any person to whom this presentation is directed. Such persons must make their own independent assessments of the contents of this presentation, should not treat such content as advice relating to legal, accounting, taxation or investment matters and should consult their own advisers. AHAM Capital and its affiliates may act as a principal and agent in any transaction contemplated by this presentation, or any other transaction connected with any such transaction, and may as a result earn brokerage, commission or other income. Nothing in this presentation is intended to be, or should be construed as an offer to buy or sell, or invitation to subscribe for, any securities. Neither AHAM Capital nor any of its directors, employees or representatives are to have any liability (including liability to any person by reason of negligence or negligent misstatement) from any statement, opinion, information or matter (expressed or implied) arising out of, contained in or derived from or any omission from this presentation, except liability under statute that cannot be excluded.

Warning Statement: A Prospectus is available for the TradePlus Shariah Gold Tracker and TradePlus S&P New China Tracker, and investors have the right to request a copy of it. Investors are advised to read and understand the contents of the Prospectus dated 28 November 2017 and Supplementary Prospectus dated 2 July 2019 (for TradePlus Shariah Gold Tracker), and Prospectus dated 15 January 2019 and Supplementary Prospectus dated 2 July 2019 (for TradePlus S&P New China Tracker) before investing. The Prospectus has been registered with the Securities Commission Malaysia, who takes no responsibility for its contents. A copy of the Prospectus can be obtained at Affin Hwang Asset Management Berhad’s sales offices. As with any forms of financial products, the financial product mentioned herein carries with it various risks. Investors are advised to consider the general and specific risks involved as stipulated in its Prospectus before investing. There are also fees and charges involved when investing in the fund, and investors are advised to consider the fees and charges carefully before investing. The price of units and distribution payable, if any, may go down as well as up and past performance of the fund should not be taken as indicative of its future performance.

Licensing Disclosure Statement & Conditions: The "S&P New China Ex A-Shares Index" is a product of S&P Dow Jones Indices LLC, a division of S&P Global, or its affiliates (“SPDJI”) and has been licensed for use by Affin Hwang Asset Management Bhd. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC, a division of S&P Global (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Affin Hwang Asset Management Bhd. TradePlus S&P New China Tracker is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P New China Ex A-Shares Index.

pdfDownload