The erratic trend in global markets continued last week, with sell-offs leaving most markets ending the week in the red. What was thought to be a light at the end of the tunnel ended in despair after hopes of a possible vaccine from Gilead in the US failed its first trial test. Pandemic cases continue to climb higher, and is now closing in on the 3 million mark. Markets also saw oil price go where is has never gone before when prices of its May contracts went into negative. Gold price climbed higher with the support of ongoing uncertainties within the global financial markets.
In the news
- The rapidly rising number of Covid-19 cases around the globe remained the key driver in influencing markets.
- In the absence of a vaccine for the pandemic, which has already taken more than 200,000 lives, global economies are torn between reopening their economies or continue to suffer from the impact of the shutdown.
- Sentiment in the US was relatively mixed after some states in the US announced it will be reopening. This was despite the rising number of cases being reported, thus raising the question if these states are ready.
- China’s PBoC cut its key loan prime rate (LPR) for banks by 20 bps (to 3.85%), and its 5-year LPR by 10bps (to 4.65%).
- China also reported that over 97% of its larger industrial enterprises have started operation, and more than half of those in operations are running about 80% of their normal capacity.
- However, the global supply chain has been disrupted as delivery of goods fail to be fulfilled on the back of external lockdowns including the US, and Europe.
- While markets tumbled, the US tech stocks stayed resilient, and managed to eked out a 0.2% gain last week in MYR terms as gauged by the NYSE FANG+ Index. The Index also remains one of the strongest YTD performer, locking in gains of 18.8%. TradePlus offers the 0830EA for investors who are optimistic on further upside for the Index, as well as the 0831EA for those who are pessimistic on the said sector.
- Focus was momentarily shifted last week toward oil price when futures contracts slipped into negative territory. Oil price faced further downward pressures despite the production cut as the outlook for global growth stayed weak. The WTI slid 12.4% last week, dragging its YTD losses to 72% in MYR terms.
- Gold price enjoyed a steady upward climb – which is expected to continue with the support of on-going volatility, the flush of liquidity from global central banks, and the lack of clarity on the end of the pandemic crisis.
- While Gold had seen a temporary sell-off last month on the back of a panic sell-off in all asset classes, price of the precious metal has been steadily climbing higher and has breached an all-new 7.5-year high. After climbing 1.8% higher last week, it is now seeing a gain of 20.9% on a YTD in MYR terms.
- Global physically-backed Gold ETFs continue to see a steady growth in its assets as investors shift towards safer haven assets amidst the uncertainty. Asset growth for the 1st quarter has already exceeded 70% of the total asset growth in 2019.
- 0828EA, Malaysia’s 1st and only physically-backed Gold ETF has also enjoyed a good momentum – tracking the gold price and rising 1.8% over the week in MYR terms.
In other economic news
- US continue to face mounting pressures on its economy as confirmed cases rapidly rise.
- Death toll has already exceeded 50,000, a number which is expected to rise further as some states continue to mull over the necessity of a lockdown.
- An additional USD484 billion will be set aside for the exhausted small businesses relief program, as well as to provide assistance to the medical sector, and to fund testing capacity.
- 4.4 million unemployment claims were made last week – bringing the 5-week total to 26 million.
- Impact from the pandemic start to surface in the EU, pushing PMI readings to record lows:
- Flash PMI composite index collapsed to a record low of 13.5 from March’s reading of 29.7,
- Service activity index slumped to a record low 11.7, which was below the expected 23.8, and
- Manufacturing index slipped to 33.6 in April vs the expected 39.2.
- The economy is expected to shrink at a rate of 7.5% in 1Q, with no clear signs of that recovering in the 2nd quarter.
- While EU leaders had agreed on a Eur480 billion emergency rescue package, they remain divided on the terms for a “rescue fund” for its member nations.
- Japan is not expected to fare much better, as IMF has forecasted an economic contraction of 5.2% for the year.
What to look out for ahead
- US job data will be released next month, and will provide a clearer picture on the health of the US’ job market.
- But before that, we’ll be looking out for the US Fed’s decision on its interest rates, which is already near zero.
- More earning results are expected out of the US – though expectations are for more reports of earning decline.
- BNM is scheduled to meet this week, and a rate cut is on the cards.
ETF strategies at TradePlus
- To Hedge:
- 0828EA – a Gold-backed ETF widely used as a storage of value in times of market uncertainty.
- 0833EA – a HSCEI Inverse strategy that helps hedge your portfolio against weakness from the performance of China companies listed on the HKex.
- 0831EA – the NYSE FANG+ Inverse strategy that hedges against the performance of tech stocks listed in the US.
- To Add Position:
- 0829EA / 0829EB – a strategy that gives investors exposure into the consumer focused sector through China companies listed in HK, and the US.
- 0832EA – a 2X leveraged strategy on the HSCEI that captures 2 times the performance of China companies listed on the HKex.
- 0830EA – a 2X leveraged strategy on the NYSE FANG+ that captures 2 times the performance of US listed tech stocks.
A look at the performance of the TradePlus ETFs, and major global indices
Learn more about TradePlus ETFs
Disclaimer: This article has been prepared by Affin Hwang Asset Management Berhad (hereinafter referred to as “Affin Hwang AM”) specific for its use, a specific target audience, and for discussion purposes only. All information contained within this presentation belongs to Affin Hwang AM and may not be copied, distributed or otherwise disseminated in whole or in part without written consent of Affin Hwang AM. 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, Affin Hwang AM 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. Affin Hwang AM 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. Affin Hwang AM 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 Affin Hwang AM 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, while a Master Prospectus is available for the TradePlus NYSE® FANG+TM Daily (2x) Leveraged Tracker, TradePlus NYSE® FANG+TM Daily (-1x) Inverse Tracker, TradePlus HSCEI Daily (2x) Leveraged Tracker and TradePlus HSCEI Daily (-1x) Inverse Tracker (collectively known as the “TradePlus L&I ETFs”), 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), as well as the Master Prospectus dated 26 November 2019 (for the TradePlus L&I ETFs) before investing. The Prospectus / Supplementary Prospectus / Master Prospectus have been registered with the Securities Commission Malaysia, who takes no responsibility for its contents. An electronic copy of the Prospectus / Supplementary Prospectus / Master Prospectus can be obtained at Affin Hwang Asset Management Berhad’s website www.tradeplus.com.my. As with any forms of financial products, the financial products mentioned herein carries with them various risks. Investors are advised to consider the general and specific risks involved as stipulated in its Prospectus / Supplementary Prospectus / Master Prospectus before investing. There are also fees and charges involved when investing in these funds, 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 funds should not be taken as indicative of their 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.
Licensing Disclosure Statement & Conditions: Source ICE Data Indices, LLC (“ICE Data”), is used with permission. “NYSE® FANG+™” is a service/trade mark of ICE Data Indices, LLC or its affiliates and has been licensed, along with the NYSE® FANG+™ Daily 2X Leveraged Index and NYSE® FANG+™ Daily 1x Inverse Index (“Indices”) for use by Affin Hwang Asset Management Berhad in connection with the TradePlus NYSE® FANG+™ Daily (2x) Leveraged Tracker and the TradePlus NYSE® FANG+™ Daily (-1x) Inverse Tracker (the “Product”). Neither Affin Hwang Asset Management Berhad nor the Product, as applicable, is sponsored, endorsed, sold or promoted by ICE Data Indices, LLC, its affiliates or its Third Party Suppliers (“ICE Data and its Suppliers”). ICE Data and its Suppliers make no representations or warranties regarding the advisability of investing in securities generally, in the Product particularly, or the ability of the Index to track general stock market performance. ICE Data’s only relationship to Affin Hwang Asset Management Berhad (“Licensee”) is the licensing of certain trademarks and trade names and the Index or components thereof. The Index is determined, composed and calculated by ICE Data without regard to the Licensee or the Product or its holders. ICE Data has no obligation to take the needs of the Licensee or the holder of the Product into consideration in determining, composing or calculating the Index. ICE Data is not responsible for and has not participated in the determination of the timing of, prices of, or quantities of the Product to be issued or in the determination or calculation of the equation by which the Product is to be priced, sold, purchased, or redeemed. Except for certain custom index calculation services, all information provided by ICE Data is general in nature and not tailored to the needs of Licensee or any other person, entity or group of persons. ICE Data has no obligation or liability in connection with the administration, marketing, or trading of the Product. ICE Data is not an investment advisor. Inclusion of a security within an index is not a recommendation by ICE Data to buy, sell, or hold such security, nor is it considered to be investment advice.
ICE DATA AND ITS SUPPLIERS DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS, EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, INCLUDING THE INDICES, INDEX DATA AND ANY INFORMATION INCLUDED IN, RELATED TO, OR DERIVED THEREFROM (“INDEX DATA”). ICE DATA AND ITS SUPPLIERS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY WITH RESPECT TO THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDICES AND THE INDEX DATA, WHICH ARE PROVIDED ON AN “AS IS” BASIS AND YOUR USE IS AT YOUR OWN RISK.