It was a short trading week last week as we celebrated the Hari Raya holidays, and US markets closed on Monday for Memorial Day. Markets moved higher as sentiment improved on the back of a gradual reopening of businesses and optimism for a vaccine. This comes amidst the pandemic infections rising above 6 million, and the US topping the infection cases with more than 1.8 million people infected, and fatalities exceeding 100,000. With already rising concerns surrounding the US-China trade ties, more pressure mounted after rioters went back onto the streets of Hong Kong, triggered by China’s imposition of national security laws.
In the news
- Global equity markets rejoiced on news that the global economy would take steps to restart its economy, with more businesses reopening their doors as containment measures are gradually lifted.
- Though tech names have remained resilient over the course of the pandemic, social media platform providers were thrown a surprise when the US President threatened to tighten regulations after Twitter posted a fact-check notice on one of his tweets. The NYSE FANG+ Index slid 0.8% lower last week, but remained a strong YTD performer with its 29.9% returns in MYR terms.
- The ECB President sent signals of a weak outlook, warning that the economy may shrink between 8 – 12% this year as the bloc continues to grapple with the impact of the pandemic.
- Geopolitical tensions remain high as critics passed comments on China’s decision to impose national security laws on Hong Kong. Rioters were back on the streets to protest China’s decision, raising concerns on Hong Kong’s future as Asia’s financial service hub.
- This had led to a more cautious tone for China’s equity markets, though broader equity indices did move higher. While the CSI300 Index, and Shanghai Composite Index inched 0.7%, and 1.0% higher in MYR terms respectively, the consumption focused S&P New China Sectors Ex A Share Index leaped 3.0% higher. This contributed to the 0829EA’s performance, which 3.2% last week to bring its YTD gains to 4.4%.
- MSCI announced that it would be shifting more derivative products it has on the SGX platform, to the HKEX – citing the merit of HKEX’s advantage of a larger customer base.
- While China had reiterated that it would meet its end of the phase 1 trade deal, the pandemic has indisputably caused disruptions.
- China is currently 40% below target for its imports of US manufactured goods, and
- 60% below target on imports for US agricultural goods.
- It was a relatively flat week for Gold price as focus turned to equities on the back of improved risk appetite. The precious metal maintains its position as a strong performer YTD, with a gain of 20.5% in MYR terms. The 0828EA, which tracks the LBMA Gold Price moved in line with the index, sliding 0.8% lower last week, after already locking in 10.9% in the 1st quarter.
In other economic news
- US economic data remained weak, but some were better than expected:
- Durable goods orders fell 7.4%, which was approximately 50% of what was expected.
- Another 2.12 million had claimed unemployment benefits – seeing a downward trend.
- Consumers’ spending tumbled 14% in April, the worst monthly decline since it started tracking data in 1959.
- Personal income rose by 11% - boosted by government’s stimulus payout from the pandemic.
- More stimulus are expected to flow out of the EU, and the UK:
- The European Commission unveiled a Eur 750 billion pandemic recovery plan.
- Germany is said to be looking into a stimulus plan valued at between Eur 50 – 100 billion.
- The ECB is expected to discuss a possible increase on its asset purchase program at its meeting later this week.
- Bank of England Governor, Andrew Bailey, stated that the recovery process for the UK economy may take longer than expected, and that the BoE is ready to provide the support that the economy needs.
- China sees improving data after the earlier drop
- Manufacturing PMI indicated an expansionary trend of 50.6 in May, following a 50.8 reading in April.
- 81.2% of manufacturing firms who took part in a survey indicated that their business operations were back up to over 80%.
- PMI for the non-manufacturing sectors was also promising at 53.6 in May, rising from the 53.2 in April.
- Industrial output for April recovered to 3.9%, from the -13.5% in January and February which was led by the lockdown measures.
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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