While the Delta variant continues to affect global economies, sentiment was raised by news of a full approval of the Pfizer-BioNTech vaccine by US FDA. US markets continued its recovery play as the tech sectors supported the broader market’s performance. The local market also fared well after the easing of restrictions for fully vaccinated individuals. However, the China markets did not fare as well as markets were spooked by regulatory uncertainties. Commodity wise, news of a potential tapering of fiscal support sent gold prices sliding in August, ending the month at USD1,814/oz.               

In the News

  • The Pfizer-BioNTech COVID-19 vaccine has received full FDA approval in the US, boosting recovery sentiment globally as more companies will be expected to mandate vaccine use.
  • However, the Delta variant of the COVID-19 virus continued its spread in August, as reports indicated that while still effective in preventing serious illnesses, vaccines were less effective against transmission of the variant.
  • News on the US Military’s withdrawal from Afghanistan after 20 years which resulted in an explosion in Kabul Airport grabbed headlines, as Taliban military forces took over the country, leading to the fall of the US-backed Afghan government.
  • While cautious on the recent inflation spike, US Federal Reserve Chairman indicated that the Feds expects to begin tapering its bond purchasing program later in the year.
  • The eventful month of August saw US equities continuing its 7th consecutive month of gains, with the tech-focused Nasdaq outperforming with 2.38% gains in MYR terms, while the S&P 500 index upped 1.30%.
  • The FANG+ Index continued to underperform the broader tech index, having been dragged down by Alibaba and Baidu’s weaker performance. Over last month the index gained 1.47% in MYR terms, while the 0830EA, which provides 200% daily exposure into the index upped 5.19%.
  • In China, regulatory uncertainties continued to plague the market, following the government’s release of its five-year blueprint calling for increased regulation in key parts of the economy, including the technology sector.
  • The increased regulatory uncertainty, coupled with the delta variant saw the China market ending mostly in the red, with new economic sectors most heavily impacted given its tilt into tech-related companies.
  • Over last month, the Shanghai Composite Index ended 2.71% in the green while the rest of the major China indices saw negative monthly performance.
  • The S&P New China Sectors ex-A Share Index remained under pressure from weakness in the tech sector, sliding to its 52-week low NAV of RM6.5561 in August.
  • In local markets, political turmoil took the spotlight in August, as the loss of majority support in former prime minister Tan Sri Muhyiddin Yassin resulted in his resignation, and the subsequent appointment of former deputy prime minister Dato’ Sri Ismail Sabri as his successor.
  • The new appointment led to a semblance of political certainty and offered a strong recovery play that boosted the local bourse when the government announced relaxation of COVID-19 SOPs for fully vaccination individuals throughout the country.
  • Over last month, the FBM KLCI index reversed its previous losses to gain 7.14%. The 0836EA, which offers investors with exposure to the top 20 highest momentum stocks lagged the broader market in August, but remains 2.11% ahead on a YTD basis. 
  • In August, the REITs sector was impacted by the resurgence of the virus, which dampened business reopening plans.  This led to the MSCI AC Asia ex Japan IMI / EQ REITs HDY Tilt Cap Index dipping 3.66% in MYR terms, and the 0837EA sliding 2.4%. The ETF remains in positive territory with its YTD gains of 5.95%.
  • Gold prices reversed its gains after the Feds expressed their intention to taper its bond purchase programs, on the back of improvements in the US labour market.
  • In August, the 0828EA slid 3.37% lower as rising confidence in global economic recovery nudged investors back into risk assets.

 

On the Economic Data Front

  • US economic data continues mixed growth  
    • Weekly jobless claims for the last week of August ticked marginally higher, but remains at its lowest levels since the pandemic.
    • Retail sales dipped by 1.1% in July from an upwards revised rate in June, but restaurant and bar sales have seen steady growth.
    • The US Commerce Department revised its 2nd quarter GDP growth number to 6.6% seasonally adjusted expansion from its previous 6.5% number.
    • Flash manufacturing PMI jumped to 61.2, while services PMI hovered above the expansionary rate at 55.4.
  • China economic growth continues to see pressure
    • Manufacturing activity continued growth at a slower pace, with PMI falling from 50.4 to 50.1 in August.
    • Official non-manufacturing PMI in August came in at 47.5, well down from July's 53.3, mainly weighed down by virus concerns.
    • Continuous slowed growth in the economy has signalled a likelihood for near-term policy support to boost growth.

 

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