Despite the rapid rise in infection case numbers worldwide, optimism about a potential vaccine and treatment pushed US markets to new record highs. Nasdaq saw 2 of its listings, Tesla Inc, and Apply Inc perform stock splits after seeing a significant price rally this year. Gold hit a 2-week high last week on the back on the weakened dollar and Fed's policy change.
In the News
- The rate of COVID-19 cases worldwide has not slowed down, as another 1 million new cases were reported last week pushing the total to over 25 million cases. Cases in the US have breached the 6 million mark, making up about a quarter of global cases.
- Market sentiment in the US was boosted by optimism of a possible vaccine and improved treatments, with the FDA approving plasma treatment for COVID-19 patients, and discussions of a potential fast track for vaccines.
- The Federal Reserve announced a shift in its view on inflation last week, noting that it will not increase interest rates ,and will allow inflation rates to run higher. This suggests that the Feds are prepared to be accommodating as unemployment rates rise.
- The S&P Dow Jones Indices saw a reconstitution of its Index yesterday, prompted by Apple’s stock split as 3 of the 30 stocks in the index were replaced. Strong performance by the tech-sector pushed the index 2.87% higher last week.
- Tech-focused Nasdaq continued to set records, gaining another 3% last week. Meanwhile, Apple’s 4-to-1, and Tesla’s 5-to-1 stock split exercise took effect yesterday, with analysts expecting prices to rally further after the split. The stock split saw prices of the stocks become more palatable, driving volumes amongst trading platforms which later resulted in a technical glitch.
- The excitement leading to the split saw the tech-focused NYSE FANG+ Index gaining 5.09% last week. Meanwhile the 2x leveraged ETF 0830EA upped 10.26% in MYR terms over the same period.
- It was a good week for the Chinese financial market as the economy has shown signs of recovery from the pandemic, with privately-owned companies leading the strong market performance.
- The Chinese government recently added several artificial intelligence technologies to its export control list, hampering the potential sale of the Chinese app Tik-Tok.
- Microsoft and Walmart have expressed interest to buy the app, as it approaches its Nov. 12 deadline to sell its business to a US-based company to avoid a US shut down.
- Ant Financial Group, the fintech company founded by Alibaba founder Jack Ma filed for its IPO last week, with aims to raise a record USD 30 billion during its expected IPO in October this year. The company is set float its shares in both Shanghai, and Hong Kong.
- The company plans to sell 5% of its shares in the Hong Kong market, with expectations to be listed into the HSCEI index, which includes Chinese companies that are listed in Hong Kong. The TradePlus HSCEI Daily 2x Leveraged tracker 0832EA aims to provide 200% exposure to the index.
- Chinese e-commerce giant Alibaba’s share price also benefitted from Ant Financials’ IPO news, as Alibaba owns a 33% stake in the company. As a result, the S&P New China Sectors Ex A Share Index saw gains of 4.42%, outperforming its peers and leading the 0829EA up by 4.41%. The New China Economy focused companies have continued to outperform the older industrial focused sector, as the Index outperformed the broader Shanghai Composite and CSI300 Index which returned 1.09%, and 3.07% in MYR terms respectively last week.
- Local markets ended mixed, as profit taking and bargain hunting activities were ongoing throughout the week. Glove counters were still in the spotlight, with prices climbing to new highs during the month despite news of a vaccine developments. The FBM KLCI dipped 3.29% throughout the week while the Dorsey Wright Technical Leaders Malaysia Index slid 1.72%, with the 0836EA down 1.79%.
- Gold prices reached a high in nearly two weeks to USD 1976/oz, with the Fed’s new policy and weakening dollar ramping up demand. Year-to-date, the 0828EA is locking in gains of 29.55% in MYR terms, retaining its spot as one of the best performing assets during the pandemic.
On the Economic Data Front
- US market continues to show signs of recovery:
- Monthly report on jobless claims is set to be released this week, with numbers starting to trend lower towards end-August.
- GDP in the 2nd quarter was reported to have contracted at a record 31.7%, but exceeded expectations of a 32.9% decline.
- However, analysts estimates GDP to rebound in the 3rd quarter, forecasting a growth of 26%.
- Industrial production has shown a 3-month consecutive rise, with estimates of continued growth looking forward.
- Consumer confidence is still lagging in the US, as it drops for the second consecutive month to a 6-year low amid the prolonged closure in majority of the service sector.
- Europe introduces additional economic stimulus amid potential second wave infections:
- Despite a surge in cases, France, Spain and Italy are looking to avoid a nationwide lockdown on optimism that they are now better equipped.
- Germany has extended its job scheme to battle effects of the pandemic, increasing its funding by EUR10 billion.
- Germany also reported an increase in business sentiment for the 4th consecutive month, signalling a strong economic recovery last quarter.
- France is set to unveil its recovery plan that includes support for businesses and tax cuts on Thursday. The plan is reported to be valued at EUR 100 billion.
- China economic data shows continuous recovery:
- Industrial profits in July surged 19.6% YoY in their fastest YoY growth since June 2018.
- Manufacturing PMI of 51.0 indicates continuous recovery albeit at a slower than expected rate, missing expectations of 51.2.
- The lower than expected expansion comes as devastating floods in the southern region delayed procurement of raw materials, and affected number of orders.
- Non-manufacturing PMI posed better growth, with a reading of 55.2 in August compared to 54.2 in July.
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