Global investors were sent into a frenzy in March, firstly when US treasury yields spiked and sent future earnings for tech stocks tumbling, and again when news broke on a margin call default by Archegos Capital. The equity markets did manage to claw back from the sell-off, with most major indices ending the month in the green, with the exception of China – where solid economic data has led the government to gradually pull back its stimulus.
- Global financial markets started the month of March with pressure from rising bond yields, which normalised soon after to reignite the demand for equities.
- The S&P 500 Index defied market expectations, and continued its upward climb to rise 6.73% in MYR terms in March. It outpaced the tech sector after concerns over its discounted future earnings put pressure on the Nasdaq, which only rose 2.81% over the same period.
- The volatility in the tech sector, which saw most major tech giants lose ground, caused the FANG 2x Leveraged ETF to dip 9.90%, while the FANG -1X Inverse ETF rose 2.97% in March.
- The Feds maintained its dovish stance, and vowed to keep interest rates low until inflation rises to 2%.
- The new administration continued with its rescue plan, boosting the wide spread vaccination program, as well as its stimulus payments of USD1,400 to its people. Infrastructure spending was also fast-tracked, with more than USD2 trillion set aside to boost the country’s transportation infrastructure, and manufacturing sector – a move that has garnered strong support from the public.
China & Hong Kong
- China indices failed to catch on to the US equities momentum, and ended weakly in the month of March. Investors took on a more cautious tone after encouraging economic data from China left the PBoC to pull back some of its stimulus measures.
- Trade tensions between the two major economic powerhouses continued, with the XinJiang cotton saga being the latest. The episode has left local Chinese boycotting some major US consumer brands, putting pressure on these US names. Tensions have also led Baidu to be the latest China-based company to take on a secondary listing in HK to avoid pressures from the US.
- The New China ETF retraced its gains to end the month with a 3.4% YTD gains after pressures from the US tech sector, and the broader weakness in HK left the ETF in the red.
- External pressures, coupled with political tensions continued to dampen the sentiment on the domestic front.
- The sight of recovery led to a pull back in the performance of the glove sectors, which had previously become the key driver of the domestic market.
- On-going rumours, and political in-fighting has left many investors staying on the sidelines to wait for more clarity, causing profit taking activity to put downward pressures on the KLCI.
- Prime Minister Muhyiddin Yassin did however announce a new stimulus package, Pemerkasa which will include a direct fiscal injection of RM11 billion to the Rakyat.
- Throughout March, the FBM KLCI index posted losses of 0.27%, while the 0836EA underperformed the broader market with marginal losses of 0.31% as strong volatility was seen in the local market.
- Gold prices continued to slump in March as rising bond yields put pressure on the precious metal. It did, however, lead to a rush for physical gold for locals, as jewellers took the opportunity to attract buyers with the drop in price.
- Throughout the month, the 0828EA, which tracks the LBMA Gold Price posed losses of 2.26% in MYR terms, while the gold price index dipped 2.24% in MYR terms.
On the Economic Data Front
- US shows weak economic data due to Fed’s dovish stance.
- 916,000 jobs were generated in March—far exceeding expectations
- Initial job gains estimate for January and February were revised upward by a total of 156,000
- Industrial production fell 2.3% in February, missing expectations of a slight increase.
- Retail sales excluding the auto segment fell by 2.7% in February, the biggest decline since April last year.
- Existing home sales fell 6.6% in February, while new home sales tumbled 18.2%, roughly twice and triple respectively of initial expectations.
- Core inflation data recorded an increase of 1.4% in February, below the Fed’s 2% target.
- China’s sees better than expected macro data
- Export orders improved by 2.4% to 51.2 while new orders improved by 2.1 to 53.6.
- Manufacturing PMI missed expectations in March but remains at expansion territory at 50.6.
- Retail sales the period of January and February together rose over 6.4% as compared to pre-pandemic 2019.
- Industrial output for the same period also rose 16.9% from pre-pandemic levels in 2019.
A look at the performance of TradePlus ETFs (as at 2 April 2021), and major global indices (as at 2 April 2021)
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