The spread of the coronavirus into at least 47 countries signalled distress for global financial markets, and the World Health Organization warned of a "pandemic potential". Equities across the globe suffered after investors worryingly moved their risk assets into safe haven instruments, leaving US treasury yields at record lows, while Gold price climbed steadily to trade above its 6-year high.

 

In the news

  • Global equity markets slumped last week after the outbreak spread across continents.
  • Over in the US, a total of USD1.7 trillion in market cap was wiped out from the S&P 500 in 2 session.
    • Companies are already forecasting weaker earnings going forward in anticipation of the impact from the virus outbreak.
    • Apple Inc had already indicated that its production would be impacted from the manufacturing supply chain disruption in China.
    • Last week, Microsoft warned that it could potentially miss its revenue forecast. The warning led to a tumble in the company’s stock price, wiping out USD62 billion of its market value.  
    • Other companies expecting weaker earnings for the coming quarter include Coca-Cola, Mastercard, and United Airlines.
  • The impact from the sell-down of the tech-related stocks pushed the NYSE FANG+ Index 11.1% lower, impacting the 0830EA which saw a 23.4% drop in its NAV price over the week.
  • China went against the tide and saw its A-share market eke out a marginal gain as investors took on a more optimistic view that the PBoC will continue to roll out more stimulus packages to cushion the impact. 
  • However, the same was not witnessed in other China-related markets, leaving the HSCEI and even the S&P New China Sectors Ex A-Share Index to be under pressure. This resulted in the 0832EA, and the 0829EA sliding 7.4%, and 4.2% respectively last week. 
  • The Hong Kong government unveiled a HKD120 billion budget to help its citizens get through these more challenging times as recession hit its economy. 
    • A total of HKD71 billion will be set aside as pay-out to its adult permanent residents.
  • The weaker performance of the equity markets led to a positive returns for the inverse strategy ETFs. Investors who had entered into these ETFs to hedge their position would have seen a 9.6% gain with the 0831EA, and 3.8% gain with the 0833EA.
  • Gold price soared, seeing positive returns for the 3rd consecutive month, trading within its 6-year high range. 
  • After a strong run at the start of the week, selling pressures capped Gold price from moving higher – but the 0828EA managed to squeeze out a 0.12% gain over the week.
  • With a weaker economic growth outlook on the cards, crude oil prices have also taken a turn – seeing one of its biggest drop in 4 years – sliding close to 16% in MYR terms last week.

 

In other economic news

  • Bank of Korea kept its benchmark interest rates unchanged at 1.25% at the meeting on Thursday, despite expectations of a rate cut by analysts.
    • The move was a surprising one given the spike in the number of infections in the country. The KOSPI suffered along with its regional peers, sliding 7.4% last week.

 

What to look out for ahead?

  • After announcing a RM20 billion stimulus package last week, analysts are expecting Bank Negara to cut its overnight policy rates at its scheduled meeting tomorrow as global risk escalates. 
  • Germany is expected to release its unemployment data this week.
  • With a relatively muted week on the economic data front, all eyes will remain on the development of the coronavirus as the spread intensifies

 

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

 

 

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