Snapshot
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1) US Federal Reserve cut rates as expected
As anticipated, the US Fed slashed its rates by 0.25% in July, marking its 1st rate cut since the financial crisis in 2008. Despite encouraging economic data flowing out of the US, the Feds Chairman, Jerome Powell cited the move as an “insurance against downside risk”. The move was seen as a defensive one, given the current sluggish global growth environment, and ensuing trade tension pressures.
The US Dollar strengthened in that period, with the support of steady fundamentals – labour, and retail market were seen being resilient despite the on-going noises. The US Treasury did, however, reacted by climbing higher.
2) China’s STAR market sees prices skyrocket
China launched its very own Nasdaq-styled tech board in Shanghai. The market launched with its first batch of 25 companies, and posted an average gain of 140% on its 1st day of listing as investors hopped onto the tech-frenzy bandwagon. Companies listed on the exchange market were those related to the high tech industry, and strategic emerging industries, which includes information, biomedicine, and high end equipment with intensive R&D input.
3) May out, Boris in
After numerous rounds of negotiations, Theresa May’s failure to deliver on her Brexit promise saw Boris Johnson taking over the helm. The first order of business saw Mr. Johnson handpicking his cabinet, in what is said as “the biggest ever clear out of a cabinet without a change in party power”. Threats of a possible “No-Deal Brexit” stoked uncertainty in the investment space, causing the British Pound to continue to tumble against the US Dollar.
4) Tariffs, tensions & missiles
Trade tensions hogged the headlines at the start of the year and has continued to do so as leaders failed to reach a resolution. Instead, tensions have only escalated further, with US President Trump threatening to impose additional tariffs while negotiations between the 2 nations were still on-going. China, obviously is not one to take threats lightly. Brazil saw its soy bean prices soar to a 2-month high as China shifted its soy bean imports away from US to Brazil.
The tariff threat, which came in the form of a twitter post by President Trump, led to the China Yuan falling against the US Dollar, sparking fears that the trade war may lead to a full-blown currency war and cause another bump in the road for global growth. The chain-reaction triggered an equity market sell-off, and Trump was quick to react by accusing China of manipulating its currency.
On the other side of the US continent, tensions were also brewing after Japan cut South Korea from its trade “whitelist” – South Korea followed suit, stating they too would be removing Japan from their own list of preferential trade partners. Amidst the market frenzy, North Korea started their own episode by carrying out their missile tests, firing multiple ballistic missiles in a move North Korea has labelled as a warning to South Korea and the US over their joint military drills.
5) It’s the Gold rush
Escalating concerns from ongoing tensions have pushed investors to seek solace in safe-haven assets. The Gold spot price have continued to climb higher, hitting a 6-year high when prices jumped above the USD1,500 per troy ounce level.
With fears that global growth would be dampened on the back of no resolution in sight, demand for the precious metal leaped ahead. Central banks joined investors in their pursuit for Gold, pushing demand to a 3-year high in July.
Gold Price (1 January 2019 – 8 August 2019)
Source: FastMarkets, ICE Benchmark Administration, Thomson Reuters, World Gold Council; as at 8 August 2019 in USD terms.
6) An Overview
Given the unresolved tensions, should we just follow the crowd and join the Gold rush? But ponder this, despite the volatility that we have continued to see in global markets, there are still markets that are climbing higher on a month-on- month basis. Being completely in safe haven assets may lead to you missing out on the run in equity markets. But then again, staying completely in the markets while watching the markets yoyo may not be the best cardio exercise you are looking for.
Our thoughts? Diversification of course!
The list of exchange-traded funds (“ETFs”) listed on Bursa Securities have continued to expand over the years, providing you with easy access into both local and foreign equity markets, as well as safe haven assets such as Gold. The ease of investing into an ETF provides you with immediate exposure into the desired markets through one single trade, while eliminating the hassle of having multiple global trading accounts, currency conversions, and dragging yourself out of bed at ungodly hours to watch and trade in markets of different time-zones.
Below is a list of available ETFs, and how they have performed thus far.
| Index | YTD (%) | MTD (%) | 3 months (%) | Stock Code |
| Commodities | ||||
| TradePlus Shariah Gold Tracker | 9.1 | -0.5 | 11.4 | 0828EA |
| Domestic Bonds | ||||
| ABF Malaysia Bond Index Fund | 0.6 | 1.1 | 1.1 | 0800EA |
| Equities | ||||
| FTSE Bursa Malaysia KLCI ETF | -3.4 | -0.6 | -2.3 | 0820EA |
| MyETF MSCI Malaysia Islamic Dividend | -5.2 | -3.1 | -3.1 | 0824EA |
| MyETF Dow Jones Islamic Market Malaysia Titans 25 | 0.0 | 2.3 | 6.6 | 0821EA |
| TradePlus S&P New China Tracker | 6.8 | 3.8 | -3.7 | 0829EA |
| CIMB FTSE China 50 | 8.2 | 0.3 | -4.8 | 0823EA |
| MYETF Dow Jones US Titans 50 | 17.4 | 0.0 | 1.4 | 0827EA |
| MyETF Thomson Reuters Asia Pacific ex Japan Islamic Agriculture | -3.9 | -0.5 | -5.3 | 0826EA |
| MyETF MSCI SEA Islamic Dividend | 2.6 | -17.0 | 1.6 | 0825EA |
| CIMB FTSE ASEAN 40 | 6.0 | -0.3 | 0.8 | 0822EA |
Source: Bloomberg as at 31 July 2019. All returns are quoted in MYR terms
Index of Global Markets
| Index | YTD (%) | MTD (%) | 3 months (%) |
| Korea - KOSPI | -7.3 | -7.3 | -9.9 |
| Malaysia - FBM KLCI | -3.3 | -2.2 | -0.5 |
| China - FTSE China 50 | 3.8 | -3.5 | -8.5 |
| Japan - TOPIX | 5.7 | -0.2 | -0.9 |
| Indonesia - Jakarta Composite Index | 6.0 | 0.8 | -0.2 |
| MSCI Asia ex Japan Index | 6.7 | -2.6 | -5.9 |
| Singapore - FTSE Straits Times | 6.7 | -2.2 | -3.9 |
| MSCI Emerging Markets | 7.0 | -2.1 | -4.3 |
| Hong Kong - Hang Seng Index | 7.2 | -3.3 | -6.6 |
| Taiwan - TAIEX | 8.4 | 0.1 | -2.3 |
| MSCI World | 15.7 | 0.0 | 0.0 |
| China - Shanghai Composite | 16.6 | -2.2 | -7.2 |
| Thailand - SET | 17.2 | -1.6 | 6.2 |
| US - S&P 500 | 18.5 | 0.9 | 0.8 |
Source: Bloomberg as at 31 July 2019. All returns are quoted in MYR terms
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