Investors turned more optimistic in the 2nd quarter of the year as reopening of economies boosted job creations, and nudged inflation higher. It also provided a thrust for the REITs sector, which enjoyed a strong recovery. The US market was a clear winner over the month, with tech stocks stealing the limelight. Asian equities were mixed over the period, with the FBM KLCI ending June as the worst performing market of the bloc. The inability to control the rapid spread of the virus has continued to drag down sentiment for domestic equities as the country shifts into another movement control order.

In the News

  • Markets in the US extended its bull run throughout the month of June as economic recovery continues in the western region of the world.
  • US Fed Chairman Jerome Powell has noted that inflation hikes can be attributed to economic reopening factors, but reassures that the hikes would resolve themselves. Powell reiterated that the Fed has no plans to hike interest rates in the near term.
  • Throughout the month of June, growth stocks outperformed cyclical names, as the Nasdaq Composite Index outperformed the broader S&P500 index by more than 100%, with the former gaining 5.94% while the latter gained 2.65% in MYR terms.
  • The FANG+ Index, which is concentrated into 10 of the largest tech innovators listed in the US outperformed the broader Nasdaq Composite Index to gain 10.20% in MYR terms. The 0830EA, which aim to provides 200% daily exposure into the index, jumped 19.51% throughout the month,  bringing its YTD gains to 35.68%.
  • In China, the broader market recorded weekly losses throughout most of June, as the resurgence COVID-19 cases in the country saw a correction in old economic sectors. Throughout the month, the CSI300 Index dipped 2.74% while the Shanghai Composite Index fell by 1.40% in MYR terms.
  • On the other hand, the S&P New China Sectors ex-A index managed to outperform the broader market, boosted by JD.com’s sales growth in its annual “618” shopping event, the equivalent to Alibaba’s Singles Day sale.
  • Throughout June, the index saw 1.69% gains in MYR terms, while the 0829EA, which tracks the index saw returns of 1.68% throughout the month.
  • In other parts of the Asia region, markets continued to show underperformance to its western counterparts as most parts of the region continue to battle the highly contagious Delta variant of the COVID-19 virus.
  • In Malaysia, the Full Movement Control Order (FMCO) was extended beyond the intended 14 day period, while the Enhanced Movement Control Order (EMCO) was introduced state-wide in Selangor and Kuala Lumpur, among other areas as case numbers remains stubbornly high in the country.
  • The extension of the FMCO and concerns of persistently high case numbers caused the FBM KLCI index to slide by 3.22%. The Dorsey Wright Malaysia Technical Leaders Index fared slightly better than the broader market, dipping 2.98% in June, while the 0836EA slid 2.56% lower over the month.
  • The effects of economic reopening were prevalent in the REITs sector, as the MSCI AC Asia ex Japan IMI / EQ REITs HDY Tilt Cap Index saw 1.52% gains in June, while the 0837EA, which tracks the index upped 1.60% in the same period, bringing its YTD gains to 6.26%.
  • Gold prices erased its previous gains in June, as the US Fed signalled an earlier than expected interest rate hike, which cause a strengthening in US Dollar, putting downward pressures in gold prices.
  • As a result, the LBMA Gold Price Index underperformed regional peers by 6.72% in MYR terms in June, while the 0828EA, which tracks the index dipped 6.58% in MYR terms, erasing its YTD gains.

On the Economic Data Front

  • US reports encouraging economic data
    • Job additions surprised on the upside in June, as 850,000 jobs were added, far exceeding expectations of 700,000 to its highest level since August 2020.
    • Weekly jobless claims also fell to the lowest since the pandemic started at 350,000.
    • Manufacturing PMI recorded at 60.6%, to its 13th straight month of growth. 

 

  • China’s macro data indicates stall in recovery
    • Official PMI figures recorded at 52.9 in June, to the lowest levels in 14 months.
    • Services PMI recorded at 52.3 in June, despite facing a resurgence in COVID-19 cases.
    • Manufacturing PMI recorded at 50.9, to its lowest level since April

 

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