The coronavirus again hogged headlines in July, with the emergence of the highly contagious Delta variant spreading rapidly across the globe – especially in regions with low vaccination rates. Global financial markets were mixed, with US equities continuing its bull run, whilst the rest of Asia just saw its investors running.  The tech, and travel sector, coupled with ongoing stimulus packages remained a driver for the US market. Optimism surrounding the reopening of economies also benefitted the REITs market. In contrast, China took a tumble after regulators announced a clampdown on its private education sector. It was double whammy for the domestic market as Malaysia continues to be held back by high Covid infection cases, and political uncertainties.

 

In The News

  • Global COVID-19 infection numbers soared in July due to the highly contagious Delta variant, which has dominated infections due to its transmissibility.
  • Despite rising infection numbers, US Fed Chairman Jerome Powell has reiterated that economic recovery in the country remains on track Interest rates are expected to remain accommodative for now.
  • Despite facing a slight decline mid-month in July, US equities continued its bull run to end positively for the 6th consecutive month. 
  • The overall reopening of its economy saw the technology sector, along with the travel sector driving performances in July.
  • Unemployment rates in the US has also dipped below the 6% level in May – for the first time since the start of the pandemic – easing concerns over labour shortages.
  • However, the highly concentrated FANG+ Index underperformed its peers, ending 0.37% lower in MYR terms, dragged down by the weaker performance of the Alibaba, and Baidu. China tech companies remained under selling pressure on fears that more restrictions would be put in place by the regulators. The 0831EA, which aim to provides -100% daily exposure into the index, gained 1.91% throughout the month.
  • In China, the central government’s crackdown on its for-profit education sector shook markets in July, with fears of heightened regulatory control spilling into technology and healthcare sectors.
  • The crackdown triggered the largest weekly loss in the CSI 300 Index since February, largely contributing to the 6.40% monthly loss while the Shanghai Composite Index fell by 3.85% in MYR terms.
  • New economy sectors were more severely impacted by continuous government crackdowns, as the S&P New China Sectors ex-A index underperformed all regional peers, sliding 15.35% in MYR terms throughout July. The 0829EA, which tracks the index recording a dip of 14.63%, while also reaching a 52-week low NAV of RM6.6159 during the month.
  • Outside of China, impact of the highly contagious Delta variant has proven more significant in Asia due to lower vaccination rates, with strict lockdowns in many parts of the regions have been imposed to curb infection rates.
  • Malaysia, despite persistently high case numbers, is now recording among the fastest vaccination rates globally, with almost 100% of residents in the Klang Valley region, which has seen the highest case numbers in the country, receiving at least 1 dose of the vaccine.
  • Despite rampant vaccination rates, the continuous MCO, along with record high case numbers continued to weigh down on the market, with the FBM KLCI index sliding 2.48% in July.
  • The Dorsey Wright Malaysia Technical Leaders Index, which uses technical analysis to identify momentum stocks outperformed the broader market slightly, dipping 2.28%.  
  • The REITs sector continued to perform in July, as the MSCI AC Asia ex Japan IMI / EQ REITs HDY Tilt Cap Index gained a further 2.67% in July while the 0837EA, which tracks the index gained 2.17%. To date, the 0837EA has recorded gains of 8.55%, reaching record high NAV of 1.0834 during July.
  • Gold prices ended in the green last month, benefitting from the continuous dovish stance on interest rates from US Fed.
  • In July, the LBMA Gold Price Index recovered its losses in June as it ended the month 5.77% in the green in MYR terms. The 0828EA also recorded gains of 5.68% during the same period.

 

On the Economic Data Front

  • US economic data indicates growth
    • GDP growth for 2Q2021 stands at an annualised rate of 6.5%, but fell short of consensus estimates of 8.5%.
    • With the second-fastest pace of growth in GDP since 2003, the economy is now larger than its pre-pandemic peak.
    • Personal consumption rose at an annualised rate of 11.8%, as economic reopening boost spending.
  • China’s economic growth slows down
    • China recorded its second quarter GDP growth at 7.9% from a year ago, missing estimates of 8.1%
    • Official manufacturing PMI eased to 50.4 in July, recording its slowest growth pace since February 2020 due to higher raw material costs, equipment maintenance and extreme weather. 

 

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