The US equity market hit a record high last week before pulling back as concerns surround the impact of the coronavirus on the global manufacturing supply chain intensified. Gold price hits a 7-year high on the back of demand for safe haven assets. Short-term market volatility is expected to continue as the coronavirus spread outside China.

 

 

In the news

  • Markets saw volatility across the week, with a mid-week spike for the US market which hit a new high before losing momentum towards the end of the week.
  • Technology stocks took the brunt of the hit after enjoying a strong run since the start of the year.
    • Apple Inc’s report of likely missing its sales forecast on the back of China’s supply disruption put pressure on its stock price. 
    • Investors then took a step back, fearing that Apple Inc was the first of many as negative consequences spread across other companies.
    • Tesla Inc, however, remained resilient and continued to perform well, gaining 14% over the week as investors were adamant that the company remains a leader in electric vehicle manufacturing.
  • China puts in place stimulus measures to support its economy as a negative impact looks imminent:
    • The PBoC slashed its 1-year loan prime rate to 4.05% from 4.15%.
    • 5-year loan rate was reduced from 4.80% to 4.75%.
    • The central bank also injected RMB 100 billion into its money markets via a 7-day repurchase agreement.
  • The China continued to move higher last week, as investors took on a more optimistic approach that the government would provide stimulus measures to support the market.
  • Commodity prices slid lower as economic activity in China slows, coupled with expectations that growth will be weaker for global economies in the interim.
  • Gold price hit a 7-year high last week when it breached the USD1,600 per ounce level after worry of negative consequences from the virus pushed investors into safe haven assets.
  • In Malaysia, the Securities Commission liberalises its regulations to allow Private Retirement Schemes to to invest into Gold Exchange-Traded Funds. 
    • 0828EA, the only physically-backed Gold ETF listed on Bursa, has remained stable amidst the volatility in the global financial markets. The ETF has gained 9.7% in MYR terms this year.

 

In other economic news

  • US home data picked up with building permits growing by 9.2% -  marking the highest level since March 2007.
  • The EU bloc’s released some encouraging data over the week:
    • Composite PMI climbed to 51.6 in February (from 51.4 in January) with the support of its services component.  The reading came in better than expected.
    • Manufacturing PMI also improved to 49.1 in February, climbing from January’s reading of 47.9
  • The UK also posted some encouraging economic data:
    • Its CPI improved for the 1st time in 6 months with a January reading of 1.8%.
    • Though below the 2% target set by the Bank of England, the inflation reading was an improvement from December’s 1.3%.
    • Job data for 4Q2019 exceeded expectations, with 180,000 new jobs being created as opposed to the 145,000 forecasted.
  • Japan’s preliminary manufacturing PMI signalled a continued contraction with a reading of 47.6, down from the earlier 48.8 in January.
  • Malaysia’s CPI reading for January also failed to meet expectations, when it was reported at 1.6% against the expected 1.7%.

 

 

What to look out for ahead?

  • US Feds indicated that rates will likely remain unchanged, but will remain vigilant on the development of the impact from the coronavirus and trade uncertainty.
  • Investors into the Malaysian market are being kept on their toes as new development unfold surrounding the domestic political scene after the surprise resignation of the Prime Minister this afternoon.
  • While global investors may be taking a wait and see approach, investors in China have been optimistic on their domestic equity market – believing that more stimulus measures will be made by the government to boost markets.
    • China’s Foresight Fund recently closed its 2nd equity mutual fund. While it targeted to raise 6 billion Yuan, the Fund managed to raise 120 billion Yuan on its first day.
    • 13 other products had enjoyed similar fund raising, and had to close their subscription period earlier.

To Hedge

  • 0828EAto hedge your portfolio with some Gold exposure.
  • 0833EAa HSCEI Inverse strategy that helps hedge your portfolio against weakness from the performance of China companies listed on the HKex.
  • 0831EAthe NYSE FANG+ Inverse strategy that hedges against the performance of tech stocks listed in the US.

 

To Add Position

  • 0829EA / 0829EBa strategy that gives investors exposure into the consumer focused sector through China companies listed in HK, and the US
  • 0832EAa 2X leveraged strategy on the HSCEI that captures 2 times the performance of China companies listed on the HKex
  • 0830EAa 2X leveraged strategy on the NYSE FANG+ that captures 2 times the performance of US listed tech stocks – which has since risen by 43.6% YTD.

 

 

 

 

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

 

 

Learn more about TradePlus ETFs

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Warning Statement: A Prospectus is available for the TradePlus Shariah Gold Tracker and TradePlus S&P New China Tracker, while a Master Prospectus is available for the TradePlus NYSE® FANG+TM Daily (2x) Leveraged Tracker, TradePlus NYSE® FANG+TM Daily (-1x) Inverse Tracker, TradePlus HSCEI Daily (2x) Leveraged Tracker and TradePlus HSCEI Daily (-1x) Inverse Tracker (collectively known as the “TradePlus L&I ETFs”), and investors have the right to request a copy of it. Investors are advised to read and understand the contents of the Prospectus dated 28 November 2017 and Supplementary Prospectus dated 2 July 2019 (for TradePlus Shariah Gold Tracker), and Prospectus dated 15 January 2019 and Supplementary Prospectus dated 2 July 2019 (for TradePlus S&P New China Tracker), as well as the Master Prospectus dated 26 November 2019 (for the TradePlus L&I ETFs) before investing. The Prospectus / Supplementary Prospectus / Master Prospectus have been registered with the Securities Commission Malaysia, who takes no responsibility for its contents. An electronic copy of the Prospectus / Supplementary Prospectus / Master Prospectus can be obtained at Affin Hwang Asset Management Berhad’s website www.tradeplus.com.my. As with any forms of financial products, the financial products mentioned herein carries with them various risks. Investors are advised to consider the general and specific risks involved as stipulated in its Prospectus / Supplementary Prospectus / Master Prospectus before investing. There are also fees and charges involved when investing in these funds, and investors are advised to consider the fees and charges carefully before investing. The price of units and distribution payable, if any, may go down as well as up and past performance of the funds should not be taken as indicative of their future performance. 

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