The light at the end of the tunnel - at least on the pandemic front - appears more evident amid the release of more positive vaccine news; with both Pfizer and Moderna announcing that their respective vaccine candidates have an efficacy rate of above 90%. However, investors were still wary of the rising case numbers around the globe, signalling that things could get worse before it can get better. As a result, markets saw volatility throughout the week. Little change were seen week-on-week as investors weighed the good and the bad, while Chinese markets performed better than its western counterparts. Gold prices continued to slip albeit a falling dollar, as demand the precious metal weakened due to positive vaccine developments.
In the News
- The world heard more positive vaccine news last week, as Moderna announced an efficacy rate of 94.5%, with Pfizer also revising its efficacy rate to 95%. Pfizer has filed for emergency use of authorisation for its vaccine with the U.S Food and Drug Administration, in hopes to start distribution next month.
- However, the spike in cases worldwide is not showing any signs of slowing down, with the total number of infections worldwide approaching the 59 million mark with the US crossing the 250,000 mark of coronavirus related deaths.
- Conflict sparked between the US Treasury and the US Federal Reserve with the former making a surprise request for the latter to return USD 455 billion of unused funds set aside for emergency lending programmes, and the Fed expressing its disagreement on the request while reiterating the need for extended lending aid.
- US markets saw high volatility and choppiness as markets balanced the good and the bad. The S&P500 index ended the week in the red, dipping 1.49% in MYR terms while tech-heavy Nasdaq rebounded from its dip last week, outpacing the broader market to gain 0.11% in USD terms. However, the index saw -0.51% returns in MYR terms throughout the week due to the weaker dollar.
- The highly concentrated NYSE FANG+ Index outperformed the market to gain 0.11% in MYR terms over the week, with the 2x Leveraged 0830EA gaining 1.54% over the week, largely attributed to Tesla’s long awaited inclusion into the S&P500 index, bringing its stock price to fresh highs. The S&P Dow Jones Indices announced that Tesla Inc is set to be included into the S&P500 index in December, after being passed over it its last quarterly rebalancing in September.
- China has signed the Regional Comprehensive Economic Partnership (RCEP) with 14 other Asian countries, including Japan and South Korea to form a free trade area that will cover over 30% of the current global GDP, with expectations to reach 50% by the year 2030.
- It is expected that the free trade agreement will see the elimination of approximately 65% of tariffs and quotas for regional trade in goods; with a targeted 90% removal in 20 years.
- The Chinese market performed better than its US counterparts with the Shanghai Composite gaining 1.97% while the CSI 300 Index upped 1.71% in the week as investors’ risk appetite improved. The S&P New China Sectors Ex A Share Index ended the week with marginal gains of 0.14%, with the 0829EA gaining 0.04% in MYR terms.
- On the local front, markets traded cautiously as investors reacted to the ongoing surge in pandemic cases and positive vaccine news, while trailing the market sentiment in the US. Throughout the week, the broader KLCI index ended the week mixed, inching 0.26% higher.
- The DWA Malaysia Momentum Index outperformed the broader market last week, with the index gaining 0.47% as glove heavyweights saw some buying momentum with the rising number of cases locally and worldwide, with the 0836EA also gaining 0.44%.
- The MSCI AC Asia ex Japan IMI / EQ REITs HDY Tilt Cap Index , gained 0.14% last week, continuing its positive momentum as more positive vaccine news saw investors gaining confidence in long term market recovery with the 0837EA ending 0.06% in the green.
- Gold prices slid 1.32% lower against the falling US dollar last week as the inflow of positive vaccine news hampered the demand for the safe haven asset. The 0828EA trailed the downwards trend, sliding another 1.36% last week in MYR terms, with YTD returns of 21.26%.
On the Economic Data Front
- US economic data shows need for additional support:
- Weekly jobless claims rose for the first time in over a month, recording at 742,000.
- Retail sales missed analyst’s expectations, recording its slowest growth pace since April at 0.2%.
- Housing data continues to provide good news, with sales and construction indicators hitting its highest levels in over a decade.
- China signals further stabilisation in its economy:
- China’s industrial output surpassed analyst expectations in October, growing by 6.9%.
- Retail sales also saw growth of 4.3%, albeit at a lower than expected pace.
Japan shows strong economic rebound from the pandemic:
- 3rd quarter GDP surpassed expectations of 18.9%, recording at an annualised rate of 21.4%.
- Coronavirus stimulus proved effective as private consumption contributed largely in boosting domestic demand.
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