Pandemic concerns were momentarily cast aside last week despite having topped more than 7 million infected cases worldwide. Instead, news were headlined by protestors taking over the streets in the US following the tragic death of George Floyd by a law enforcement officer. Better than expected economic numbers, and with the gradual reopening of global economies however, provided support for a rally in equity markets which left global indices climbing higher for the 3rd straight week.
In the news
- Pandemic cases continue to climb higher as we await a vaccine, and infection cases have now topped 7 million. The US remains at the top of the table with the highest number of reported infections as it sees its number of cases close in to the 2 million mark.
- Concerns over the pandemic were momentarily overshadowed by the Black Lives Matter movement, which started in the US following the killing of George Floyd by a law enforcer. The movement saw strong global support as activists across the world marched in protest of racism.
- As protests continue, the US seem divided in its support for President Trump and his attempts at addressing the civil unrest that is taking place.
- Nevertheless, businesses have been gradually reopening, a move that has been taken positively by investors – evident in the improved performance of financial markets.
- Talks of more stimulus being pumped into the economy amidst an environment of relaxation towards the lockdown measures had helped support stock prices in Europe. The broader index rose 6.9% last week, but has not yet managed to claw back to levels where it started this year.
- Stocks in China had also risen as trade tensions between the US and China eased, and economic data stayed encouraging.
- The consumption-centric sectors continued to take the lead, with the S&P New China Sectors Ex A Shares Index leading the pack with a 5.7% gain in MYR terms last week. On a YTD basis, the index has risen more than 10%, staying far ahead of its peers such as the MSCI China (4.7%), CSI300 (0.7%), Shanghai Composite (-1.5%), and the FTSE China 50 (-2.5%).
- The 0829EA has seen a steady gain by tracking the S&P New China Sectors Ex A Share Index, which holds increasingly popular e-commerce names such as Tencent, Alibaba, JD.Com, Meituan Dianping, and Pindoudou Inc within its components. It rose 5.8% in MYR terms last week, bringing its YTD gains to 10.4%.
- Oil price had trended higher over the week as talks continued for production cuts to be prolonged. Oil price have bounced back from its lows, and have since recorded a 59.7% gain in MYR terms over a period of 1-month.
- After a strong run this year, Gold took a breather on the back of an improved risk environment. The LBMA gold price slid 2.6% lower last week but maintained its steady standing YTD, with a stellar 17.1% gain in MYR terms.
In other economic news
- US releases better than expected data – boosts sentiment
- Jobs within the private sector was said to have contracted by 2.7 million in May, much better than the expected contraction of 9 million
- A total of 2.5 million jobs were added back into the job market in May
- Unemployment rate in the US improved to 13.3%, from the 14.7% in April – beating expectations as some analysts forecasted unemployment to hit 20%.
- ECB releases more liquidity into the market as inflation numbers fall
- Pandemic emergency purchase program will be increased from EUR 750 billion, to EUR 1.35 trillion and extended till at least June 2021.
- Proceeds from maturing bonds will be reinvested until end 2022,
- EU’s inflation slowed to 0.1% in May as energy prices tumbled. The May’s reading slid from the 0.3% reading in April, and is now at its 4-year low.
- Germany will see a EUR 130 billion stimulus package – a move which would see cuts in VAT, rebates for electric cars, as well as funds for infrastructure upgrades
- PBoC makes its move
- RMB 400 billion quota was set for the central bank to purchase up to 40% of domestic loans made by local banks to SMEs
- SMEs will also see support following a pledge by the PBoC to assist with local banks to provide loan extensions, and interest payment reliefs
- Policymakers have put in place measures to assist these SMEs following the impact of the pandemic – allowing SMEs to defer interest, as well as principal payments until 2021.
- Official PMI slides marginally lower from 50.8 to 50.6 in May, and remains in an expansionary phase.
- Caixin Services PMI rose to 55.0 – a reading that was much better than expected, pushing it back into expansion following the pandemic outbreak.
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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