It was a week of synchronised stimulus packages being rolled out by global central banks as we grappled with the impact of the coronavirus outbreak. The virus continued to spread across continents, raising alarm bells as the death toll increased. Global financial markets remained under pressure despite the rate cuts as equities and bond yields tumbled.

 

In the news

  • Effects of the virus on the global supply chain became more apparent when the JP Morgan global manufacturing index came in at 47.2, 3.2 points lower than its previous month.
  • The US state of California announced a state of emergency last week after it recorded its first fatality from the virus. 
  • The US equity market slid lower as the government remained unclear on how it would address the current situation, and the insufficient number of test kits to go round as the number of infected rose.
  • As the outbreak persists, global economic growth is projected to slow this year. The IMF announced an emergency funding to a tune of USD50 billion, mainly set aside for its members, prioritising on emerging economies to tackle the epidemic.
  • China-related indices took the lead last week as China took on better control of the virus situation. The Shanghai Composite rose 5.2%, while the S&P 500 Index shed 0.4% in MYR terms last week. 
  • The domestic equity market remained under pressure as weakening oil price, and political uncertainties dampened market sentiment. The KLCI eked out a marginal 0.03% gain, leaving its YTD returns at -6.7%.
  • The travel and tourism sector continued to take the brunt of the hit as travel bans widens.
  • On the energy front, talks by OPEC to reduce oil production fell through, leading to a slump in oil price. The WTI closed at USD 41.28 per barrel on Friday’s, sliding 8.7% lower  from the previous week in MYR terms.
  • Rising concerns surrounding the health of global economies, and the extend of the impact from the virus outbreak has pushed investors to continue to seek refuge in Gold. The LBMA Gold Price rose 2.66% in MYR terms over the week.
  • The 0828EA, the only physically-backed Gold ETF listed on Bursa, gained 2.61% last week, bringing its YTD returns to 12.7% in MYR terms.

 

In other economic news

  • It was a week of policy rate cutting trend as global central banks looked into measures to cushion the impact of the virus outbreak..
  • The Reserve Bank of Australia started the week by lowering its official cash rates by 25bps, moving it to a record low of 0.5%.
  • The US Federal Reserve then shocked markets with an emergency rate cut.
    • The Feds slashed its rates by 50bps to bring its policy rates to a range of 1.00% to 1.25%.
    • Though stock markets would historically climb higher after a rate cut, it merely spiked after the initial decision before tumbling lower. 
    • The S&P 500, and Dow Jones Industrial Average index both ended close to 3% lower for the day.
  • As expected, Bank Negara also cut its OPR rates, this time by 25bps in view of the current global economic environment.
  • Dragged down by the impact of the virus, China released weaker economic data:
    • YoY export data fell 17.2% collectively in January, and February – a large contrast to the growth of 7.9% seen in December.
    • Imports have also fallen by 4%, from the 16.5% recorded in December.
    • Non-manufacturing PMI dropped to a new low of 29.6 in February, from 54.1 in January.
  • US job data provided some reprice for markets, with a total 273,000 new jobs generated in February.

 

What to look out for ahead?

  • Now that China is seeing more stability in the virus containment, we will need to look out for how the western countries address the outbreak as reports of infected persons rise.
    • Italy has since announced a lockdown on 16 million people after a rapid spike in number of cases.
    • S.Korea has seen improving number of infections, and have come up with a revolutionary test system to address the high number of cases.
    • The US remain unclear on its plans to address the virus outbreak while reported cases continue to rise.
  • All eyes will continue to remain on the development of the virus as it spreads across the globe.
  • Investors would also be looking out on the direction of oil price given its large slump last week. 
  • To Hedge:
    • 0828EA – to hedge your portfolio with some Gold exposure.
    • 0833EA – a HSCEI Inverse strategy that helps hedge your portfolio against weakness from the performance of China companies listed on the HKex.
    • 0831EA – the NYSE FANG+ Inverse strategy that hedges against the performance of tech stocks listed in the US.
  • To Increase Position:
    • 0829EA / 0829EB – a strategy that gives investors exposure into the consumer focused sector through China companies listed in HK, and the US
    • 0832EA – a 2X leveraged strategy on the HSCEI that captures 2 times the performance of China companies listed on the HKex
    • 0830EA – a 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

 

 

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