Global market sentiment turned negative as volatility spiked. US markets were shaken with the “short squeeze” event that caused hedge fund investors substantial losses. Markets worldwide trailed the negative sentiment as all major global indices ended the week in the red. Locally, record breaking numbers of positive COVID-19 cases further dragged down sentiment as investors await further announcement on  MCO 2.0. In China, the central bank’s withdrawal of liquidity from its financial system sent its markets into correction territory. While gold prices were also not spared from the drop, the precious metal showed resilience as prices steadied after a marginal dip of 0.12% in MYR terms. The weaker performance of markets led to the inverse strategy ETF taking the lead on the performance table.

In The News

  • Total number of COVID-19 cases worldwide has crossed the 100 million mark, recording over 103 million cases with 2.2 million deaths globally.
  • Since taking to office, the newly minted US President has signed 42 executive orders – with addressing the wide spread pandemic, and assisting the needs of Americans at the forefront of the orders. While the move was seen as a positive step forward for the country, the stock market failed to join the celebration, as stock market corrections dragged down global indices, and the overall investors’ sentiment.
  • US markets ended the month of January with an extraordinary “short-squeeze” event, driving unusual volatility in electronics retailer GameStop and movie theatre chain AMC.
  • Retail investors banded together on social media to go head-to-head against the hedge fund managers. The hedge fund managers were forced to cover their short positions at a loss after retail investors drove up the share price of Gamestop in particular. The move has pushed the regulators to scrutinise investors’ practices, as well as that of the trading platforms.
  • The US Federal Reserve concluded their January meeting and maintained its monetary policy while noting that business activity in the country has soften due to the resurgence in COVID-19 cases.
  • All major US indices slid throughout the week, recording its worst week since late October. Over the week, the S&P 500 index slid by 3.38% in MYR terms while tech-focused Nasdaq dipped 3.56%. The FANG+ index underperformed major indices, sliding 4.17% over the week. Consequently, the 2x Leveraged 0830EA dipped 8.33% in MYR terms, while the -1x Inverse 0831EA gained 3.27% in MYR terms.
  • Chinese markets went into correction territory during the week after its central bank drained USD 12.1 billion in liquidity from its financial system, causing all major indices to end in the red. The CSI 300 index dipped 2.69% while the Shanghai Composite index slid by 2.69% in MYR terms.
  • The S&P New China Sectors Ex A Share Index underperformed the broader markets as investors took profits especially in the EV, technology and healthcare sectors, dipping 4.8% over the week in MYR terms while the 0829EA dipped 4.03%. However, the ETF saw a strong rally throughout most of January and is currently seeing YTD gains of 8.43%.
  • In local markets, negative sentiment from the US dragged sentiment lower. This was coupled with record breaking number of positive COVID-19 cases recorded in the country, which raised concerns over a possible extension to the MCO 2.0.
  • Last week, the FBM KLCI dipped by 1.9%, while the 0836EA, which tracks the Dorsey Wright Technical Leaders Malaysia MYR Index dipped 1.08% over the week.
  • Despite strong volatility that brought global markets down, gold prices only slid marginally by 0.12% in MYR terms to end at USD1852.70/oz while the 0828EA slid by 0.13%. The weaker sentiment for risk appetite had boosted the strength of the Dollar, leaving the price of the precious metal to take a hit.

On the Economic Data Front

  • US economy growth slows amid virus impacts
    • GDP grew weaker than expected in the fourth quarter at an annualised rate of 4.0%.
    • Consumer spending for December fell by 0.2 for the second month in a row.
  • European economies show resilience in fourth quarter
    • German GDP grew by 0.1% due to growth in exports and construction, but revised its 2021 forecast for GDP growth to 3% from 4.4%.
    • Spanish economy grew unexpectedly by 0.4% driven partly by increased household consumption.

 

ETF strategies at TradePlus

 

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

 

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