Pandemic case numbers continued its rapid rise, with the spike in cases in India and UK leading the increase. US markets experienced a sharp selldown towards the end of last week, causing a spillover effect that left most global markets to end in the red. Market volatility impacted oil prices as prices dipped below USD40/barrel, while gold price remained supported above the USD1,900/oz level, ending the week at USD1,937/oz.

 

In the News

  • While the rate of increase in pandemic cases from the US have declined, global numbers remain high with a total of over 27 million cases. India itself recorded over 90,000 new cases on Sunday (6/9), a record high for the country. 
  • US markets’ continuous rally over the past 5-weeks ended on Thursday when the tech sector tumbled as on the back of a rotation from growth to value stocks. 
  • The US released its August unemployment report last week, recording its 4th consecutive monthly decline to 8.4% as 1.4 million jobs were added, boosted by hiring activity in both government and retail sectors.
  • While unemployment rate beat market expectations, the US is still far from its pre-pandemic rate of 3.5% in February.
  • Data released last week saw trade deficit recording its highest MoM numbers in July since 2008, as recovery in imports continue to outpace exports in the US. 
  • The S&P 500 slid from its all-time high last week, closing 2.76% lower than the previous week. Nasdaq, one of the best performers of the year posed the largest losses last week, as it closed 3.71% lower than the previous week.
  • While many had expected electric car maker Tesla to be included into the S&P500, it was ultimately excluded from the US’ main index despite fulfilling the requirement of recording profits for 4 consecutive quarters. 
  • The selldown in the broader tech index caused the NYSE FANG+ Index to dip 4.06% last week, which contributed to the 0831EA’s gain of 3.48%. However, performance of the index this year has been phenomenal, upping 74.26% since the start of this year, with the 2x leveraged ETF 0830EA locking in YTD gains of  97.59% in MYR terms. 
  • Impacted by the selldown in the US market, Chinese indices also closed lower last week, with the CSI 300 dipping 1.65% while the Shanghai Composite Index posed 1.55% losses last week.
  • With the September 15 deadline coming up, no agreement has been made between ByteDance’s TikTok and potential buyers. The popular Chinese app faces bans in the US if no deal is struck by the deadline.
  • As the trade war between US and China continues, rumours of more bans have been circulating as the US is now considering to include China’s largest semiconductor company SMIC into its blacklist, further escalating tensions. 
  • China’s geopolitical tension with neighbouring country India has also escalated due to the Himalayan border dispute, which resulted in India’s decision to ban Chinese apps in the country. The region has been cited by many Chinese’s companies’ as a region of growth due to the size of its market.
  • As a result of rising geopolitical tensions and the war against Chinese technology apps, the S&P New China Sectors Ex A Share Index saw losses of 3.16%, though its YTD performance remains in the double digits at 26.87% and the 0829EA posting YTD gains of 25.98%. 
  • Local markets also ended lower following the negative market sentiment, coupled with further profit taking activity. Markets also experienced selling pressure ahead of Bank Negara’s meeting to decide on its monetary policy.
  • Glove heavyweights Top Glove and Supermax issued their respective 1-for-2 and 1-for-1 bonus issues last week, making prices more affordable which resulted in a slight climb in prices.
  • The broader FBM KLCI dipped 0.61%, while the Dorsey Wright Technical Leaders Malaysia Index slid 1.88% as the domestic market faced headwinds.
  • The rapid selloff in the US market also spilled over to crude oil as prices slid below USD40/barrel for the first time in over a month, plunging 7.87% in MYR terms in a week.
  • Gold was also not spared from the sell-off as prices closed at USD1,937/oz, dipping 1.39% from the previous week. Despite the decline in prices, the 0828EA continues to perform on a YTD basis, recording gains of 28.92% in MYR terms.

 

On the Economic Data Front

  • US posed encouraging economic data despite sharp selldown:
    • Unemployment data recorded at 8.4%, beating analyst’s estimates of 9.8%.
    • 1.4 million jobs were added in August, an encouraging number despite a decline in recovery pace from June and July.  
    • Trade deficits reached a 12-year high as consumer demand for export goods rebounds.
    • VIX, which measures investors expectations of short term volatility spiked to a two-month high following the sharp selldown late last week.

  • Economic data shows a need for additional stimulus in the Eurozone:
    • UK negotiations with the EU has turned pessimistic, as UK has expressed intentions leave the EU with a no-deal outcome, if no agreement is to be made ahead of the 15 October deadline. 
    • The French government has made preparations to extend its emergency furlough scheme beyond 2020 if needed, further expanding the EUR100 billion stimulus announced last week.
    • An early estimate of eurozone consumer prices has indicated an inflation of -0.2%, a record low in over 5 years, adding on pressure for the ECB to ramp up stimulus aid in the region. 

  • Continuous rebound expected as China successfully contains virus:
    • PMI readings in August indicates continuous recovery in the country, albiet at a slower pace, with private gauged data indicating the fastest expansion rate in manufacturing activity since 2011.
    • Readings show that China’s production activity remains resilient despite the impact of floods over the summer.
    • Services companies increased hiring for the first time since January, signalling a recovery in the labour market.
    • The official reading for services PMI was 55.4 in August, contributed by stronger domestic demand for services.  

 

ETF strategies at TradePlus

 

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

 

 

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