Global financial markets ended the week flattish as concerns over a new virus strain that hampered the usual Santa Claus rally.  The US finally signed a USD900 billion pandemic relief bill this morning, a move which will see it avert a government shutdown. Over in Europe, a no-deal Brexit was narrowly avoided when the UK and EU came to an agreement on a post-Brexit deal after prolonged negotiations. Tension was more strained across the continent, as antitrust probes pressured stock prices of US-listed China's tech giants lower. Sentiment was also weak on the local front, leaving investors to profit take over the week as cases continued to soar. Gold prices rose higher over the week as the uncertainties surrounding the pandemic, coupled with a weakened US Dollar provided the precious metal support.

In The News

  • The new strain of the COVID-19 virus discovered in the UK resulted in countries imposing travel bans and restrictions on UK outbound flights.  While the virus is said to transmit faster, it has been reported not to be more deadly than the current strain, and is likely treatable by vaccines. The world added around 4 million new cases last week, totalling to over 81 million cases with 1.7 million deaths.
  • Positive news on the USD 900 million stimulus package boosted sentiment, as both the House and Senate passed the stimulus bill by wide margins, but was met with setbacks as President Donald Trump proposing higher direct payments which was blocked by Republicans in the house. The President finalised and signed the package this morning (28/12), securing aid for approximately 14 million people.
  • The supposed Santa Claus rally has been largely absent this year as the world continues to grapple with the rapid spread of the virus. US indices posted mixed results throughout the shortened trading week, with the tech focused Nasdaq slightly outperforming its peers last week, seeing 0.88% of gains while the S&P500 index eked 0.33% higher.
  • However, the FANG+ index did not fare well, dragged down by Alibaba which saw a 14.19% drop in its US listing in MYR terms following antitrust investigations launched against the company.  Over the week, the FANG+ index dipped 2.43%, dragging the 2x Leveraged 0830EA down by 4.42%, while the -1x Inverse 0831EA upped 2.26% in MYR terms. The 0830EA is still seeing YTD gains of 149.97% from the strong run in most parts of 2020.
  • Heightened Sino-US tensions dragged major Chinese indices down, with the US publishing a list of Chinese and Russian companies that have ties to its respective militaries, requiring a license for US companies looking to sell items which might be used for military purposes in the two countries.
  •  As a result, major indices in China ended the week mixed, with the CSI 300 faring the best, upping 1.31% in MYR terms while the Shanghai Composite index gained a marginal 0.52% in MYR terms. The S&P New China Sectors Ex A Share Index underperformed its peers, as the US-listed China tech giants faced pressure from antitrust laws, causing a 0.88% dip in MYR terms over the week. Consequently, the 0829EA ended 0.92% in the red, bringing its YTD gains to 31.12%.
  • Sentiment in local market trailed the general global sentiment, as profit taking activity was seen throughout the trading week, coupled with continuous high numbers of COVID-19 cases recorded throughout the country, especially among foreign workers. Panasonic Manufacturing Malaysia Bhd was ordered to close on Monday (21/12) after 116 of its employees tested positive for the virus.
  • Over the week, the FBM KLCI index ended 0.69% in the red, while the Dorsey Wright Technical Leaders Malaysia MYR Index outperformed the general market, gaining 0.27% as positive momentum was seen in the local technology sector, resulting in the 0836EA seeing weekly gain of 0.25%.
  • Gold prices ended the week in the green, as optimism of a signed stimulus package, coupled with the weaker dollar sent LBMA gold prices up by 0.15% in MYR terms, while the 0828EA upped 0.18%, with YTD gains of 20.57%.

On the Economic Data Front

  • US economic data continues to signal weak recovery from the virus
    • Weekly jobless claims declined more than expected, but remains as high levels of 805,000.
    • Household incomes fell by 1.1% in November, while household spending dipped 0.4% with faltering government assistance.
    • Housing sector shows continuous signs of cooling, as exiting home sales fell more than expected (2.5%) in November
  •  Efforts to curb the spread of the virus expected to hamper Eurozone economic recovery
    • After 9 months of negotiations, the UK and the EU has agreed on a post-Brexit trade deal and is now awaiting approval from all member states.
    • UK’s economy shrank by 8.6%. from 2019 levels, lesser than the projected 9.7% contraction. However, recession is expected to deepen further in 4Q2020 as lockdowns are implemented to control the spread of the virus.
    • In Germany, business morale rose unexpectedly in December but is expected to dip again as strict lockdown measures are imposed.

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