Global markets started the year strong as major equity indices edged higher despite the uncertainties we continue to face. In the US, Presidential candidate Joe Biden's victory was formalised by Congress, despite the unprecedented attack on the US Capitol which disrupted proceedings. The Democratic Party also solidified its power in the Senate after winning both runoff elections in Georgia, granting the party total control of both Congress and the White House. Nearing the end of his term in office, President Trump continues his crackdown on Chinese equities, reportedly adding Chinese tech giants into its ban list; while the NYSE went back and forth on its decision to delist 3 Chinese telcos. Locally, the rapid spread of the virus across the country wore down sentiment as investors turned back to the healthcare sector as the nation awaits for the government's latest update on measures to combat the pandemic. Gold prices rose marginally on the back of a weaker US dollar, coupled with prevailing uncertainties across the globe.

 

In the News

  • Last week, the unprecedented storm into the US capitol as lawmakers met to certify Democrat candidate Joe Biden’s victory in the US elections dominated headlines worldwide, resulted in 5 deaths, and left dozens hospitalised.
  • However, markets seemed to largely ignore the extraordinary event, as the optimism of a significantly larger stimulus aid boosted market sentiment last week, as the Democrat’s win in both of the Georgia runoff elections solidified the party’s unified control of the government.
  • Despite the political uncertainties that unfolded throughout the week, US markets continued to reach new highs, with the S&P 500 gaining 2.07% in MYR terms throughout the week, while the tech-focused Nasdaq outperformed the boarder market to gain 2.68%.
  • Electric vehicle (EV) makers stole the limelight last week, as Tesla’s share price rallied sharply, making its founder, Elon Musk the richest person in the world; while Baidu announced its agreement with carmaker Geely Auto to produce EVs for the Chinese market. Alibaba also announced its joint venture with the China’s largest automaker SAIC motor to produce EVs, while Apple is rumoured to be in early discussions with Hyundai to produce a self-driving EV. 
  • The NYSE FANG Index, which tracks 10 of the most renown tech names listed in the US including those mentioned above, outperformed its peers, rising 3.02% in MYR terms. The 0830EA, which aims to provide 2X the daily performance of the said index saw rose 5.46% last week, adding onto its 168% gains in 2020. The strong performance of its underlying names pushed the ETF’s stock price to its all-time high when its NAV closed on Friday at RM12.85 per unit.
  • Tensions between the US and China intensified as President Trump approaches his final days in office, as the crackdown on Chinese equities continued with reports that Alibaba and Tencent was to be included in the US’ stock ban list as it also considers banning China based apps like Alipay, Wechat Pay and others. 
  • The NYSE also contributed to the uncertain fate of Chinese stocks listed in the US, as the exchange went back on its decision to delist 3 Chinese telco’s; China Mobile, China Unicom and China Telecom, only to revert back to its decision by the end of the week.
  • However, the Chinese market once again proved its resiliency as the CSI300 and the Shanghai Composite Index rose by 6.57% and 3.88% respectively in MYR terms last week, as China showed pushback against US’ sanctions by issuing orders that its companies need not comply with foreign restrictions, allowing its citizens and companies to sue for compensations for damaged interests.  
  • The New China Economy Index (gauged by the S&P New China Sectors Ex A Share Index) also ended the week in the green, upping 5.26% in MYR terms. The 0829EA, which tracks the Index ended the week with at a record high NAV of RM8.6109 after enjoy more than 5% gains over last week.
  • In local markets, the raging spread of the virus throughout the country dominated market sentiment, as the pending announcement from the government regarding renewed measures on the current Movement Control Order (MCO) saw rotation back into the healthcare sector.
  • With the rotation from recovery stocks into healthcare names, the 0836EA underperformed the market, sliding 2.84% as investors moved out from recovery names, while the broader KLCI gained 0.37%, supported by sharp gains in glove heavyweights.
  • However, long term recovery theme is still detected across the Asia ex Japan region, as the MSCI AC Asia ex Japan IMI / EQ REITs HDY Tilt Cap, which comprises high yielding quality REITs saw gains of 1.39% , while the 0837EA upped 1.07% throughout the week. 
  • Despite the rally in equities globally, Gold prices rose marginally as uncertainties that have continued to hover over global economies prevailed, coupled with the weaker dollar, pushing the LBMA Gold Price Index 0.25% higher in MYR terms to end at USD 1,891.30/oz. Meanwhile, the 0828EA also saw marginal gains of 0.25% throughout the week in MYR terms.

 

On the Economic Data Front

  • World Bank cuts global economic growth forecast:
    • January 2021 Global Economic Prospect report forecast economic growth of 4% from the previous target of 4.2% growth.
    • GDP growth targets were lowered for approximately half of global economies; the U.S. GDP is expected to be 3.5%, the eurozone GDP 3.6%, while China’s economy could expand 8%.

  • US economic data shows mixed recovery:
    • The Institute for Supply Management (ISM) announced that manufacturing PMI rose to its highest level since August 2018, at 60.7.
    • ISM’s gauge for service PMI also beat expectations, hitting 57.2 to its highest level in three months. 
    • Labour market data surprised on the downside, as a drop of 140,000 jobs were recorded, compared to the predicted gain of 50,000 jobs.
  • Eurozone data shows continued deflation:
    • Eurozone consumer prices dipped 0.3% y-o-y, suffering from its 5th straight month of declines.
    • Germany may see economic expansion in 4Q2020, as industrial output rose by 0.9% in November, beating expectations, while imports, exports and factory orders also beat consensus, rising 2.2%, 4.7% and 2.3% respectively.

 

ETF strategies at TradePlus

 

A look at the performance of the TradePlus ETFs, and major global indices

 

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