If the US and China were friends on Facebook, their relationship would likely be described as "It's Complicated" at best. Ties between the two economic giants have been rift since President Trump took to the White House as continuous threats drove a wedge between the two. What started as threats on trade tariffs have escalated to condemnation by the US on China's decision to impose its security law on Hong Kong. Tensions intensified further last week when the US ordered China's consulate in Houstan to close.
- The relationship between the US and China has been complicated ever since President Trump took office, adamant that China was robbing the US of jobs.
- Threats of trade tariffs by the US started very early on in Trump’s presidential term, and has been dragged on throughout the 4-years that he has remained in office.
- While the phase 1 trade deal between the two led to a collective sigh of relief globally, we are now left holding our breath again as we await the next course of action by one of the most erratic US presidents in history.
- The recent decision by the US to order the closure of China’s consulate in Houston was not well received by the Chinese government. China was quick to retaliate and issue its own closure order on the US’ consulate in Chengdu.
- As “tit-for-tat” actions continue to be thrown between the two economic giants, investors have decided to take a step back on fears of further escalation.
- The broader US markets, and China stocks slid lower after hearing US’ decision to shut China’s consulate in Houston. Global equity markets also followed suit and ended the week weaker.
Marketplace: How did Markets React?
- Trudging through a sluggish global growth environment where global economies are trying desperately to move ahead from the effects of the on-going Coronavirus pandemic, global equity markets stumbled from the additional pressure.
- The already fragile state of global financial markets was faced with more pressures from the US – China debacle.
- Most major indices took a hit; the S&P 500 index shed 0.3%, while the tech-focused NYSE FANG+ Index slid 1.4% lower in local currency terms last week.
- Stock prices in China were not spared, with the Shanghai Composite, and the CSI300 Index both sliding 0.5%, and 0.9% lower respectively in local currency terms over the same period. The consumption-focused S&P New China Sectors Ex A Share Index shed the least over the week, and now stands as the strongest performer for the year, with a 19.4% gains in MYR terms.
- Gold, which has been quietly inching higher, jumped an impressive 5.0% in USD terms last week as investors turned cautious amidst the on-going uncertainties.
- The precious metal may not be the asset class of choice when making investment decisions during normal market conditions, but the environment that we are in seem very far from normal. Gold price have recorded a gain of 25.4% in local currency terms this year (as at 24th July 2020), and remains one of the strongest performers to date. Might it be time to friend Gold, and add some exposure to your portfolio?
Events: What to Expect?
- At the time of writing, there has been more than 16 million Coronavirus cases being reported globally. The rapid rise in number of cases have set off alarm bells, as fears of a resurgence heightened.
- Armed with little more than optimism that a vaccine will soon be found, not much is expected to change in the interim.
- Global economies continue to trudge along, leading analysts to forecast weak global growth for the year.
- Central banks have been at the forefront of the action, slashing interest rates and putting in place stimulus measures to mitigate the impact of the pandemic on its respective economies.
- Throw in the increasing geopolitical risk between the US and China, investors are left in the dark as to what to expect next.
- Financial markets are seeing shorter and sharper market movements, reacting to news more vigorously than ever. A scenario that has led to leveraged, and inverse strategy ETFs being the instrument of choice in some markets as investors take short-term market opportunities.
- At the same time, we have seen companies with stronger fundamentals seeing its share price beaten down, providing an opportunity for investors to build their portfolio for the longer term.
- The more cautious investors, however, have turned to safe-haven assets – leaving global Gold ETFs to see 18 consecutive weeks of inflows as investors scramble to safeguard their assets from further devaluation.
Help & Support: What are the Options?
- Depending on your risk profile, and investment preference, TradePlus by Affin Hwang Asset Management offers a wide range of exchange-traded funds ("ETFs") to choose from.
- Whatever your views are on the markets, there’s an ETF for you.
Feel free to contact the ETF team for more info, or reach out to us via any of the below platforms for more information.
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