Market sentiment improved last week after the de-escalation of political tension between the US and Iran, and the signing of its phase 1 trade deal between US and China. The semblance of clarity nudged investors to move back into riskier assets, pushing global equities to hit new highs.

 

In the news

  • The domestic equity market failed to keep up with the pace of its global peers, and slid lower over the week as weaker CPO prices put pressure on the market.
  • CPO prices were impacted after tensions between Malaysia and India led the India government to effectively halt palm oil imports from Malaysia.
  • After an intense start of the year, markets found calm after the political tension between the US and Iran eased.
  • Sentiment improved further when the US and China finally inked its phase 1 trade deal last week, after 3-years of tariff threats and negotiation talks.
  • China’s New Economy Sectors were seen moving ahead of the broader indices, as gauged by the S&P New China Sectors Ex A Share Index.  Capitalising on China’s economic transition, the index, which is tracked by the TradePlus S&P New China Tracker (0828EA),  rose 1.4 % in MYR terms last week. (Read more about China’s New Economy Sectors here to learn about the sectors that are benefitting from the economic transition.)
  • The performance the index was seen benefitting also from the strong performance of technology-related stocks, evident in the 1.6% gain in MYR terms of the NYSE FANG+ Index. The S&P New China Sectors Ex A Share Index holds major China-based tech companies like Alibaba Group Holdings, Tencent, and Baidu within its constituents.
  • Electronic car maker, Tesla, hit an all-time-high in its stock price last week after posting a surprise 3Q profit, and strong 4Q deliveries that beat expectations supported by its production line in China.
    • After a meteoric rise which has seen its share price gain 6.8% in USD last week to bring its YTD gains to 22.0% up till 17 Jan 2020, analysts believe that Tesla is now once of the most shorted company on the US stock market.
    • As global economies focus on growing its electric cars segment, coupled with the shift in innovation in the technology sector, is it time to build a double long exposure in the NYSE FANG+ Index through TradePlus NYSE FANG+ Daily (2x) Leveraged Tracker (0830EA), or would it be time to take lead from the analysts and hedge some position through the TradePlus NYSE FANG+ Daily (-1x) Inverse Tracker (0831EA)?

 

In other economic news

  • China’s economy recorded its economic growth at 6.1% - within the expected range it has set earlier in the year. This marked China’s slowest growth in 29 years as the economy faced trade tensions with the US.
    • Other data flowing out of China was, however, encouraging, with industrial production beating analysts forecast (6.9% vs 5.9%).
    • Export figures also grew by 7.6% in December, a large leap from the 1.3% contraction recoded in November.
    • Retail sales grew by 8.0% in December, though unchanged from November, it had beat the forecasted 7.9%.
    • Germany’s GDP growth dropped to a 6-year low (0.6% in 2019) as Europe’s largest economy faced challenges in its car industry.  The manufacturing sector contracted by 3.6% last year.
  • The broader EU’s industrial production also slowed to a 0.2% MoM, missing the 0.3% forecasted
    • Over the same month, inter EU trades has also fell by 3.8%, whilst imports from its global partners slid 4.6%.

 

What to look out for ahead?

  • Will the Bank of England look to cut interest rates at the end of this month after disappointing PMI numbers out of UK?
  • The People’s Bank of China had already cut borrowing costs to boost economic activity – leading to new bank lending in China hitting a record USD 2.44 trillion in December. 
  • But with the weak PMI numbers, can we expect more stimulus from the PBoC?  What does this mean for China’s equity markets?
  • With little signs on how phase 2 of the US – China trade deal will go, should we be expecting more market volatility ahead?
  • What does this mean for the China equity markets? Will there be opportunities to capitalise from the growth in China companies and start considering opportunities within the Hang Seng China Enterprises Index? The TradePlus HSCEI Daily (2x) Leveraged Tracker (0832EA) offers the opportunities to gain approximately 2X the exposure to the HSCEI Index.
  • But if its volatility that you’re expecting, it might be time to look into hedging your position with the TradePlus HSCEI Daily (-1x) Inverse Tracker (0833EA), an ETF that provides you an inverse return to the Hang Seng China Enterprises Index. Alternatively, there is an opportunity to hedge your investment portfolio through the TradePlus Shariah Gold Tracker (0828EA), a physically-backed Gold ETF listed on Bursa, and traded in Ringgit.

 

A look at the performance of the TradePlus ETFs, and major global indices

Source: Affin Hwang AM as at 10 Jan 2020.  Prices and returns are quoted in MYR terms, and reflects the closing NAV of the ETF.

 

Source: Bloomberg as at 17 January 2020. Returns are quoted in MYR terms.

 

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