Market news for the week largely revolved around optimism towards a vaccine, in the midst of a worsening pandemic globally. Most major equity indices ended the week higher as news of a vaccine rollout boosted investors' confidence. At the same time, we saw the UK "cancelling" Christmas after a new strain of the virus was found to be spreading fast than normal around the country. Over in the East, strong economic signals from China remained dominant, which led investors to brush aside the rising China-US tension after the US expanded its ban list by including more than 60 China-based companies to the list. Optimism that economies would be taking steps to reopen given the availability of a vaccine rollout has nudged crude oil prices higher; but at the same time, the weaker Dollar coupled with looming uncertainties has allowed the safe haven Gold to climb higher. 

 

In the News

  • The US Food and Drug Administration (FDA) approved another vaccine for use in the US, the Moderna vaccine, that uses a similar technology to the previously approved Pfizer/BioNTech vaccine. With this approval, the number of doses available by the end of this year is expected to double. 
  • The virus continued to rage on in most parts of the world, with the UK discovering a new variant of the virus that is said to spread faster than normal, causing the country to impose a Tier 4 lockdown throughout the holiday period. Worldwide cases now records at over 77 million cases, and more than 1.6 million deaths.
  • Throughout the trading week, US’ congress negotiated the USD 908 billion stimulus proposal, showing optimism as an outline was achieved but without an agreement on Friday. However, congressional leaders announced agreement on the long awaited stimulus bill on Sunday (20/12) which would provide direct payments, new federal assistance to households, small businesses and health-care provider.
  • The progress in stimulus negotiations drove indices to fresh highs during the week, but faltered on Friday as an agreement could not be reached. Over the week, the S&P500 index upped 1.00%, while tech-focus Nasdaq gained 2.80% as information technology stocks outperformed other sectors.
  • The NYSE FANG+ Index, a concentrated index of 10 technology stocks jumped 5.55% as its constituents delivered good performance throughout the week. Baidu, Tesla and Twitter were among the top performers last week, with weekly gains of 19.21%, 13.66% and 8.34% respectively. As such, the 2x Leveraged 0830EA returned 9.19% of gains throughout the week, bringing its YTD return to 161.5% in MYR terms. 
  • US’ ban on Chinese companies continued, as the former added over 60 companies including chipmaker SMIC to its’ Entity List’ as blacklist targets. On the other hand, Chinese regulators imposed fines on Alibaba and Tencent subsidiaries amounting to RMB 500,000 each due to a breach of anti-monopoly laws over previous acquisitions. 
  • Despite the negative news, Chinese markets stayed resilient as economic data released throughout the week signalled a strong continuous recovery in its economy from the pandemic. Last week, the CSI 300 gained 2.10% in MYR terms while the Shanghai Composite index saw gains of 1.27%. However, the S&P New China Sectors Ex A Share Index fared weaker than its peers, as the index only rose 1.12% in MYR terms. Over the week, the 0829EA saw gains of 1.15% , bringing its YTD gains to 32.34%.
  • Locally, markets were focused on the budget which passed its third and final reading with a narrow majority of 111 versus 108. However, sentiment turned negative with the announcement of another extension for the Conditional Movement Control Order (CMCO) till 31st of December 2020 for Selangor, Kuala Lumpur and Sabah. 
  • The FBM KLCI index dipped 1.90%, while the Dorsey Wright Technical Leaders Malaysia MYR Index’s fared slightly better, dipping 0.48% throughout the week, leaving the 0836EA to falter 0.15% lower over the week.
  • The REITs sector continues to show signs of rebounding, as economies start to reopen and the world starts to distribute the vaccine on a wide scale. Over the week, the Bloomberg Asia REITs Index saw 1.17% gains in MYR terms, while the MSCI AC Asia ex Japan IMI / EQ REITs HDY Tilt Cap gained 1.86% in MYR terms over the week, bringing the 0837EA to end 1.98% in the green.
  • Commodity wise, Gold prices rose slightly over throughout the week, as the deadlock in stimulus negotiations in Friday sent the precious metal down, but losses were hampered by a cautious mood in equity markets due to uncertainties, along with a weakening US dollar. Last week, LBMA gold prices gained 2.22% in MYR terms, leading the 0828EA to rise 2.19%, recording a YTD gain of 20.35%.
  • Crude oil prices rose for the 7th straight week on the back of big scale vaccine rollout and stimulus negotiation efforts, bringing 5.17% gains to the Bloomberg WTI Cushing Crude Oil Spot Index.

 

On the Economic Data Front

  • US economic data unexpectedly weak as it continues to grapple with the virus:
    • Retail sales fell by 1.1% in November. This is roughly triple the expected decline, and now at its worst levels since April.
    • Weekly jobless claims jumped unexpectedly to 885,000, reaching its highest level since September.
    • However, continuing claims dropped to pandemic low at 5.51 million.

  • China’s economy continue to show strong recovery:
    • Retail sales, a key indicator of consumption trends in the country, rose by 5% from a year earlier, recording its 4th month of expansion.
    • Industrial production also grew by 7% from a year earlier, the highest since March 2019.

  • EU shows signs of market recovery:
    • Flash Eurozone PMI rose to 49.8 in December from 45.3 in November, beating consensus expectations of 45.8.
    • Brexit talks continue, with both sides agreeing to compromise further to reach a deal before the transition period ends on 31st December.

  • Japan revises economic outlook as virus rages on:
    • The government revised its GDP forecast for 2020 fiscal year end to a 5% contraction from 4.5% in July.
    • Concurrently, GDP growth forecast for 2021 fiscal year end was also revised to 4% growth from its earlier forecast of 3.4%. 
    • A record JPY 107 trillion budget is being planned in government - expected to address coronavirus impacts, social welfare and additional military spending.

 

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