Investors' appetite for risk rose on the back of prospects for an economic recovery as lockdown restrictions were relaxed, and optimism for a coronavirus vaccine. But pressure soon mounted after President Trump escalated his rhetoric against China over the pandemic. Global equity markets ended the week mixed, whilst Oil price continued to surge for the 4th consecutive week.
In the news
- Global market sentiment remained buoyed by optimism that pharmaceutical companies were closer to finding a vaccine for the pandemic, and more businesses reopening despite global infection cases rising above 5.4 million.
- Equity markets pushed higher at the start of the week, allowing the US S&P 500 Index to hit its highest level since March 6 before being dragged down by mounting uncertainties surrounding the US-China relation.
- China-based companies were seen to be the target of the relationship fallout. Tighter restrictions were slapped on telco giant, Huawei, on the use of US technology. Thereafter, the US Senate approved a legislation that could lead these companies from being disqualified to trade on U.S. stock exchanges.
- Chaos arose again in Hong Kong after China announced plan to impose a national security law. The announcement led to 180 people being arrested as teargas, pepper spray and water cannons were used on rioters.
- Technology focused names remained resilient with the NYSE FANG+ Index rising 4.1% in MYR term over the week. The 0830EA, which aims to provide a 2 times daily exposure to the NYSE FANG+ Index benefited from the performance and gained 5.3% itself.
- China opened its annual National People’s Congress on Friday, with little surprises being reported by China’s Premier Li Keqiang.
- Policymakers were however, provided with more flexibility as the official growth target was scrapped in favour of prioritising labour market stabilisation, and curbing poverty.
- Premier Li, did also reiterate China’s commitment to fulfilling its Phase 1 trade deal with the US, and keeping the Renminbi stable.
- Asian markets closed weaker last week, with Hong Kong’s Hang Seng Index tumbling -3.4%, and the Hang Seng China Enterprises Index sliding -2.4% in MYR terms. The 0833EA, which aims to provide the reverse daily performance of the HSCEI, gained 2.5% over the same period.
- After falling to historical lows, Oil price have made a comeback, spiking to USD 33.6 per barrel at the end of last week. It was the 4th consecutive weekly rise for Oil.
- Gold price slid marginally lower last week after the spike to sentiment nudged investors back into risk assets.
In other economic news
- US data remained weak, but promise of vaccine and more intervention by US Fed provided hope:
- Employment data remained weak with another 2.4 million filing for unemployment benefits. Trailing nine-week total now at nearly 39 million.
- News that Modena Therapeutics had encouraging early test results for a possible coronavirus vaccine pushed equity markets higher in early week.
- With the less than encouraging data, US Fed boosted sentiment stating there were “no limits to what we can do”, indicating that there may be other available tools to address the slowing economy.
- Business activities bounced-off in Eurozone as coronavirus lockdowns were relaxed:
- Countries began to emerge from lockdown with Italy, Spain, and Greece to restart in June.
- Cross border rules will be set to minimise infection risks.
- UK inflation rate tumbles to below 1% amid coronavirus disruption – its weakest since 2016.
- Malaysia’s economic data slows, but stock trading activity spikes:
- Consumer Price Index (CPI) dropped 2.9% in April, the sharpest drop in 50 years.
- All eyes are on companies’ quarterly reporting, which will serve as indication of the pandemic's impact.
- Thus far, 40% of the listed companies had released their report, with 55% reporting earnings decline.
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
Learn more about TradePlus ETFs
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