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.

Flows into Gold ETFs (Mar 2018 - Mar 2020)

LBMA Gold Price (Dec 2019 - 23 Apr 2020)

 

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

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