Global financial markets took a tumble towards the end of last week after recording 3 consecutive weeks of positive gains. News that infection cases spiked after the reopening of businesses in the US, coupled with a bleaker outlook for the US economy took its toll on global financial markets. Despite having major oil producers agreeing to a production cut, prices were not able to sustain itself, and oil price tumbled along with stock prices. Gold jumped back into the limelight and regained momentum as investors shifted out of riskier assets amidst the uncertainties.  


In the news

  • Infection cases in the US spiked after some states reopened its doors for businesses. Ongoing protests by activists against the wearing of masks is unlikely to help control the situation. The US now has more than 2 million infected cases, and more than 115,000 deaths. 
  • Besides the looming fears of a 2nd wave, investors’ confidence were further dragged down after the US Fed Chair, Jerome Powell, indicated that the impact of the pandemic on the US economy may be more severe, and may require more time for the economy to bounce back from its current environment.
  • Powell also predicted there may be a prolonged impact on the labour market caused by the pandemic, and warns that unemployment rate could end this year above the 9% level.
  • It was a similar tone coming out of the UK, as the BoE Governor warned of potential longer-term damage on the economy caused by the pandemic.  The UK’s GDP shrank by 20.4% between March and April despite some signs of an economic pickup from the easing restrictions on businesses.
  • Civil unrest continued to escalate in the US as protestors remained on the streets of US to fight against racism, coming face-to-face against the law enforcer, and putting more pressure on the already fragile state of the US economy.
  • Global financial markets tumbled just before the end of the week, giving up gains that it had gradually accumulated in the previous 3 weeks. The S&P Index took a nose dive on Thursday, after briefly moving back into the green on a YTD basis.  The Index is now down 1.7% for the year in MYR terms, after sliding 4.7% lower last week. 
  • While the energy, and financial sector took the brunt of the hit within the US market, companies that were more inclined towards being used under lock-down were more resilient. The stock price of companies such as Amazon, and Apple Inc held steady despite the sell-off, rising 2.5%, and 2.2% in USD terms last week. 
  • Amidst the sea of red, the NYSE FANG+ Index managed to eke out a marginal 0.4% gain last week as performance of tech-centric companies soldiered on. This gave the opportunity for the 0830EA to also climb higher last week.
  • China’s equity markets slid lower along with its global peers, though the consumer-centric index, the S&P New China Sectors Ex A Share Index, maintained its position as the stronger performer within the Hong Kong / China bloc on a YTD basis with its 10.1% returns in MYR terms.
  • The 0829EA / 0829EB had continued to see a steady climb until performance was temporarily halted triggered by the spike in uncertainties stemming out of the US. The ETF has returned 9.7% on a YTD basis in MYR terms. 
  • Comparatively, the China-centric indices has remained relatively more resilient compared to its peers. With the success of keeping the pandemic spread under control, the China government has been easing measures further to get its economy back on track, and recently allowed its street vendors to resume business. 
  • After jumping into the limelight for its stellar performance in the previous weeks, Oil price lost ground in view of the bleaker global growth outlook. Oil tumbled 8.3% lower last week in MYR terms after closing the week at USD36.26 per barrel.
  • Gold started to shine again after being cast aside in favour of risk assets in the last 3 weeks.  With rising uncertainties plaguing global markets, Gold price soared 1.6% last week. The 0828EA, which tracks the performance of the LBMA Gold Price has recorded a YTD gain of 18.2% in MYR term as at last week.


In other economic news

  • US: Error in the data?
    • While the markets had earlier rejoiced on the better than expected unemployment data flowing out of the US, the Bureau of Labor Statistics have come out to acknowledge that they are working to rectify the data collection error that may have led to an under reporting of the unemployment rate.
  • Europe’s weak data
    • Germany’s data was worse than expected after seeing its output numbers plunge by 17.9% MoM in April.
    • Similarly, import data was also week after shrinking by 16.5% MoM in April.


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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