Equity markets turned south last week after more negative reports on the outlook for markets were released. The potential resumption of a trade war between the US and China, and President Trump's reckless remarks on the situation only served to put additional pressure on markets. With more than 4.5 million infected cases reported globally, the pandemic crisis continues to be a key risk for global markets as the health experts scramble in search of a vaccine. The escalating uncertainties pushed Gold price higher for the week.


In the news

  • US Fed Chairman Jerome Powell reported that the US economy could see more elaborate downside risk, and the pandemic crisis could likely lead to a lasting damage on the productive capacity of the US economy.  While there may be a possibility for more stimulus measures, Powell dismissed the idea of cutting interest rates below 0%.
  • Markets were served with another blow when President Trump signalled that he had no interest in resuming trade negotiations with China, and he would consider cutting off US’ relation with China. While some have said these were distraction techniques by Trump, risk of a possible geopolitical situation put pressure on global financial markets.
  • Global markets felt the escalating pressures and halted its upward climb. Tech-related names remained resilient, rising 1.1% last week as seen by the performance of the NYSE FANG+ Index, as compared to the broader market as the S&P slipped 1.9% in MYR terms.
  • While China’s economy is seeing improvements in its domestic demand and a recovery in its domestic supply, a complete normalisation may be an uphill battle as its overseas demand slumps amidst a disruption in the global supply chain as economies globally battle the pandemic.
  • Performance of China-related markets were led by the consumption focused S&P New China Sectors ex A Share Index, which rose 0.8% last week in MYR terms, and also contributed to the performance of the 0829EA, which is benchmarked against the Index, which rose alongside it. The Index outperformed its peers, and have recorded a YTD gain of 4.8% in MYR terms while the Shanghai Composite is down 1.90%, and the CSI300 Index is down 0.4% over the same period.  
  • Oil price continued its upward climb to end the week at USD29.4 per barrel, a 20.7% jump in MYR terms last week.  The cut in production, coupled with improving demand and the reopening of some parts of the global economy provided support for the black gold. 
  • Gold price rose to its highest level for the month as geopolitical tensions, and the economic devastation from the pandemic crisis continues. Global physically-backed Gold ETFs continue to enjoy a steady stream of inflows – the 0828EA has since recorded a YTD return of 20.6% in MYR terms after rising 3.1% last week.


In other economic news

  • It was another week of disappointing economic data for the US:
    • 3 million more citizens filed unemployment claims last week.
    • Auto sector retail sales tumbled 17.2% in April – its biggest fall on record.
    • Retail sales slid 16.4% lower.
    • Industrial production fell 11.2%.
    • CPI fell 0.8% in April, largely dragged down by the weakness in oil price.
  • The EU economy sees the impact from the pandemic:
    • The broader bloc saw its economy contracting by a record 3.8% QoQ.
    • GDP contraction was seen across most of its member countries in the likes of France (-5.8%), Spain (-5.2%), Italy (-4.7%) and Germany (-2.2%).
    • The ECB’s Vice President is optimistic that the EU’s economy would rebound in 2021, with a possibility of seeing a 6% expansion.
  • China’s economy rebounds as economic activity gets back on track:
    • Industrial production rose 3.9% YoY.
    • Retail sales is down 7.5% YoY in April, improving from the -15.8% in March.


ETF strategies at TradePlus

  • To Hedge:
    • 0828EA – a Gold-backed ETF widely used as a storage of value in times of market uncertainty.
    • 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 Add 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.


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



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